PRELIMINARY  ECONOMF? 


!'AR-Y  :' 


EFFECTS  0 


;arly  effects  of  the  European  war 
upon  the  finance,  commerce  and 


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Carnegie  Endowment  for-  International  Peace 

DIVISION  OF  ECONOMICS  AND  HISTORY 

JOHN   BATES  CLARK,  DIRECTOR 


PRELIMINARY  ECONOMIC  STUDIES  OF  THE  WAR 

EDITED  BY 

DAVID  KINLEY 

Professor  of  Political  Economy.  University  of  Illinois 
Member  of  Committee  of  Research  of  the  Endowment 


EARLY  ECONOMIC  EFFECTS  OF  THE 
EUROPEAN  WAR  UPON  CANADA 

BY 

ADAM  SHORTT 

Formerly  Commissioner  of  the  Canadian  Civil  Service,  now  Chairman, 
Board  of  Historical  Publications,  Canada 


EARLY  EFFECTS  OF  THE  EUROPEAN  WAR 
;;    UPON  THE  FINANCE,  COMMERCE  AND 
INDUSTRY  OF  CHILEj 

BY 

LSLS.  ROWE 

Professor  of  Political  Science,  University  of 
Pennsylvania 


NEW  YORK 

OXFORD  UNIVERSITY  PRESS 

AMERICAN  BRANCH :  3S  Wist  3*nd  Street 
LONDON.  TORONTO,  MELBOURNE.  AND  BOMBAY 

1918 


"H — r-c  •■   :.■  ^'JL 


-«^J- 


T*T — r^-rr*- 


COPYRIGHT  1918 

BY  THE 

CARNEGIE  ENDOWMENT  FOR  INTERNATIONAL  PEACE 
2  Jackson  Place,  Washington,  D.  C. 


INTRODUCTORY  NOTE  BY  THE  DIRECTOR 

The  Division  of  Economics  and  History  of  the  Car- 
negie Endowment  for  International  Peace  is  organized 
to  "  promote  a  thorough  and  scientific  investigation  of 
the  causes  and  results  of  war."  In  accordance  with  this 
purpose  a  conference  of  eminent  statesmen,  publicists, 
and  economists  was  held  in  Berne,  Switzerland,  in 
August,  1911,  at  which  a  plan  of  investigation  was 
formed  and  an  extensive  list  of  topics  was  prepared. 
An  elaborate  series  of  investigations  was  undertaken, 
and,  if  the  war  had  not  intervened,  the  resulting  reports 
might  have  been  expected,  before  the  present  date,  in 
printed  form. 

Of  works  so  undertaken  some  aim  to  reveal  direct 
and  indirect  consequences  of  warfare,  and  thus  to  fur- 
nish a  basis  for  a  judgment  as  to.  the  reasonableness  of 
the  resort  to  it.  If  the  evils  are  in  reality  larger  and 
the  benefits  smaller  than  in  the  common  view  they  ap- 
pear to  be,  such  studies  should  furnish  convincing  evi- 
dence of  this  fact  and  afford  a  basis  for  an  enlightened 
policy  whenever  there  is  danger  of  international  conflicts. 

Studies  of  the  causes  of  warfare  reveal,  in  particular, 
those  economic  influences  which  in  time  of  peace  bring 
about  clashing  interests  and  mutual  suspicion  and  hos- 
tility. They  show  what  policies,  as  adopted  by  different 
nations,  reduce  the  conflicts  of  interest,  inure  to  the 
common  benefit,  and  afford  a  basis  for  international  con- 
fidence and  good  will.  They  tend,  further,  to  reveal 
the  natural  economic  influences  which  of  themselves  bring 
about  more  and  more  harmonious  relations  and  tend  to 
substitute  general  benefits  for  the  mutual  injuries  that 
follow  unintelligent  self-seeking.  Economic  interna- 
tionalism needs  to  be  fortified  by  the  mutual  trust  that 
just  dealing  creates;   but  just  conduct   itself  may  be 


1.82309 


iv        INTRODUCTORY  NOTE  BY  THE  DIRECTOR 

favored  by  economic  conditions.  These,  in  turn,  may  be 
created  partly  by  a  natural  evolution  and  partly  by  the 
conscious  action  of  governments;  and  both  evolution  and 
public  action  are  among  the  important  subjects  of  inves- 
tigation. 

An  appeal  to  reason  is  in  order  when  excited  feelings 
render  armed  conflicts  imminent;  but  it  is  quite  as  surely 
called  for  when  no  excitement  exists  and  when  it  may 
be  forestalled  and  prevented  from  developing  by  sound 
national  policies.  To  furnish  a  scientific  basis  for  rea- 
sonable international  policies  is  the  purpose  of  some  of 
the  studies  already  in  progress  and  of  more  that  will 
hereafter  be  undertaken. 

The  war  has  interrupted  work  on  rather  more  than 
a  half  of  the  studies  that  were  in  progress  when  it  be- 
gan, but  it  has  itself  furnished  topics  of  immediate  and 
transcendent  importance.  The  costs,  direct  and  indirect, 
of  the  conflict,  the  commercial  policies  induced  by  it  and, 
especially,  the  direct  control  which,  because  of  it,  govern- 
ments are  now  exercising  in  many  spheres  of  economic 
activity  where  formerly  competition  and  individual  free- 
dom held  sway,  are  phenomena  that  call,  before  almost 
all  others,  for  scientific  study.  It  is  expected  that  most 
of  the  interrupted  work  will  ultimately  be  resumed  and 
that,  in  the  interim  before  this  occurs,  studies  of  even 
greater  importance  will  be  undertaken  and  will  be  pushed 
rapidly  toward  completion. 

The  publications  of  the  Division  of  Economics  and 
History  are  under  the  direction  of  a  Committee  of  Re- 
search, the  membership  of  which  includes  the  statesmen, 
publicists,  and  economists  who  participated  in  the  Con- 
ference at  Berne  in  1911,  and  two  who  have  since  been 
added.    The  list  of  members  at  present  is  as  follows : 

Eugene  Boeel,  Professor  of  Public  and  International 
Law  in  the  University  of  Geneva. 

Lujo  Brentano,1  Professor  of  Economics  in  the  Uni- 
versity of  Munich;  Member  of  the  Royal  Bavarian 
Academy  of  Sciences. 

1  Membership  ceased  April  6,  1917,  by  reason  of  the  declaration  of  a  state 
of  war  between  the  United  States  and  the  Imperial  German  Government. 


INTRODUCTORY  NOTE  BY  THE  DIRECTOR         v 

Charles  Gide,  Professor  of  Comparative  Social  Eco- 
nomics in  the  University  of  Paris. 

H.  B.  Greven,  Professor  of  Political  Economy  and 
Statistics  in  the  University  of  Leiden. 

Francis  W.  Hirst,  London. 

David  Kinley,  Professor  of  Political  Economy  in  the 
University  of  Illinois. 

Henri  La  Fontaine,  Senator  of  Belgium. 

His  Excellency  Luigi  Luzzatti,  Professor  of  Con- 
stitutional Law  in  the  University  of  Rome;  Secretary 
of  the  Treasury,  1891-93;  Prime  Minister  of  Italy, 
1908-11. 

Gotaro  Ogawa,  Professor  of  Finance  at  the  Uni- 
versity of  Kioto,  Japan. 

Sir  George  Paish,  London. 

Maffeo  Pantaleoni,  Professor  of  Political  Economy 
in  the  University  of  Rome. 

Eugen  Philippovich  von  Philippsberg,1  Professor 
of  Political  Economy  in  the  University  of  Vienna; 
Member  of  the  Austrian  Herrenhaus,  Hofrat. 

Paul  S.  Reinsch,  United  States  Minister  to 
China. 

His  Excellency  Baron  Y.  Sakatani,  formerly  Minister 
of  Finance;  formerly  Mayor  of  Tokio. 

Theodor  Schiemann,2  Professor  of  the  History  of 
Eastern  Europe  in  the  University  of  Berlin. 

Harald  Westergaard,  Professor  of  Political  Science 
and  Statistics  in  the  University  of  Copenhagen. 

Friedrich  Freiherr  von  Wieser,3  Professor  of  Po- 
litical Economy  in  the  University  of  Vienna. 

The  function  of  members  of  this  Committee  is  to  select 
collaborators  competent  to  conduct  investigations  and 
present  reports  in  the  form  of  books  or  monographs- 
to  consult  with  these  writers  as  to  plans  of  study!  to 
read  the  completed  manuscripts,  and  to  inform  the 
officers  of  the  Endowment  whether  they  merit  publica- 

1  Died,  June,  1917. 
„f  „2M^ber8hiP  ceased  April  6,  1917,  by  reason  of  the  declaration  of  a  state 
of  war  between  the  United  States  and  the  Imperial  German  Government 

Membership  ceased  December  7,  1917,  by  reason  of  the  declaration  of  a 
state  of  war  between  the  United  States  and  Austria-Hungary  QeClaratlon  of  a 


vi        INTRODUCTORY  NOTE  BY  THE  DIRECTOR 

tion  in  its  series.  This  editorial  function  does  not  com- 
mit the  members  of  the  Committee  to  any  opinions  ex- 
pressed by  the  writers.  Like  other  editors,  they  are 
asked  to  vouch  for  the  usefulness  of  the  works,  their 
scientific  and  literary  merit,  and  the  advisability  of  issu- 
ing them.  In  like  manner  the  publication  of  the  mono- 
graphs does  not  commit  the  Endowment  as  a  body  or 
any  of  its  officers  to  the  opinions  which  may  be  expressed 
in  them.  The  standing  and  attainments  of  the  writers 
selected  afford  a  guarantee  of  thoroughness  of  research 
and  accuracy  in  the  statement  of  facts,  and  the  character 
of  many  of  the  works  will  be  such  that  facts,  statistical, 
historical,  and  descriptive,  will  constitute  nearly  the 
whole  of  their  content.  In  so  far  as  the  opinions  of  the 
writers  are  revealed,  they  are  neither  approved  nor  con- 
demned by  the  fact  that  the  Endowment  causes  them 
to  be  published.  For  example,  the  publication  of  a 
work  describing  the  attitude  of  various  socialistic  bodies 
on  the  subject  of  peace  and  war  implies  nothing  as  to 
the  views  of  the  officers  of  the  Endowment  on  the  sub- 
ject of  socialism;  neither  will  the  issuing  of  a  work,  de- 
scribing the  attitude  of  business  classes  toward  peace 
and  war,  imply  any  agreement  or  disagreement  on  the 
part  of  the  officers  of  the  Endowment  with  the  views 
of  men  of  these  classes  as  to  a  protective  policy,  the 
control  of  monopoly,  or  the  regulation  of  banking  and 
currency.  It  is  necessary  to  know  how  such  men  gen- 
erally think  and  feel  on  the  great  issue  of  war,  and  it  is 
one  of  the  purposes  of  the  Endowment  to  promote  studies 
which  will  accurately  reveal  their  attitude.  Neither  it 
nor  its  Committee  of  Research  vouches  for  more  than 
that  the  works  issued  by  them  contain  such  facts;  that 
their  statements  concerning  them  may  generally  be 
trusted,  and  that  the  works  are,  in  a  scientific  way,  of 
a  quality  that  entitles  them  to  a  reading. 

John  Bates  Clark, 

Director. 


EARLY  ECONOMIC  EFFECTS  OF  THE  WAR 
UPON  CANADA 


EDITOR'S  PREFACE  TO  THE  PRELIMI- 
NARY STUDIES  OF  THE  WAR 

The  following  brief  study  of  the  early  effects  of  the 
war  upon  Canadian  industry,  trade  and  finance,  was 
prepared  by  the  author,  Dr.  Adam  Shortt,  formerly  of 
the  Civil  Service  Commission  of  Canada,  now  Chairman 
of  the  Board  of  Historical  Publications,  to  indicate  in  a 
general  way  the  character  of  the  extended  study  of  the 
same  subject  which  he  is  preparing  for  publication  later. 
The  chapter  contains  so  much  of  interest  and  value  to  the 
people  of  our  own  country  at  the  present  juncture  that 
it  seemed  proper  to  the  Director  of  the  Division  of 
Economics  and  History  and  to  the  editor  to  publish  it. 
It  is  the  first  of  a  series  of  preliminary  studies  on  the 
effects  of  the  war.  It  is  the  intention  of  the  Endowment 
to  prepare  and  issue  in  due  time  a  comprehensive  docu- 
mentary and  critical  history  of  the  war.  Such  a  history, 
however,  is  a  work  of  years  and  could  not  be  prepared 
in  time  to  be  of  immediate  service  to  our  people  in  their 
conduct  of  the  war.  Inasmuch  as  the  experiences  of  the 
Allied  countries  already  at  war  have  valuable  lessons  for 
us,  especially  within  the  first  year  of  our  participation, 
it  has  been  decided  to  issue  a  series  of  preliminary  war 
studies,  setting  forth  their  experiences. 

The  effects  of  the  war  on  the  trade,  the  external 
policies  of  nations,  and  also  upon  their  internal  economic 
organization,  will  be  far  reaching.  The  cost  of  the  war 
will  be  so  great  that  expenditures  upon  measures  pro- 
motive of  welfare  are  likely  to  be  long  postponed.  The 
programs  of  social  betterment,  legislation  looking  to  the 
improvement  of  conditions  of  labor,  the  suppression  of 
poverty,  improvements  in  the  conditions  of  employment 
of  women  and  children,  better  health  conditions,  better 


viii  EDITOR'S  PREFACE 

education,  social  health  and  life  insurance,  probably  will 
all  be  delayed  on  account  of  the  tremendous  expenditures 
of  the  conflict.  The  probable  necessary  reorganization 
of  public  budgets  to  meet  the  burden  of  taxation  will 
leave  little  income  to  apply  to  such  projects.  The  whole 
world  had  reached  a  high  state  of  expectation  with  refer- 
ence to  general  social  betterment,  budgets  were  being 
constructed  and  financial  systems  were  being  molded 
with  that  in  view.  The  war  has  dimmed  the  hopes  of 
the  reformer  about  these  matters,  and  doubtless  will 
make  improvement  of  the  conditions  of  living  a  harder 
problem  than  before. 

For  the  cost  of  the  war  is  to  be  reckoned  not  merely 
in  destruction  of  wealth.  It  is  draining  the  working 
power  of  the  world,  and  is  adding  to  the  number  less 
capable  of  taking  care  of  themselves.  It  has  increased 
the  army  of  the  maimed,  the  halt,  the  blind  and  the 
dependents,  and  has  imposed  upon  all  the  rest  of  us  the 
task  of  caring  for  them  as  a  sacred  duty  and  a  debt  of 
gratitude  for  the  sacrifice  which  they  have  made  for  us. 
But  the  cost  and  the  sacrifice  we  cannot  stop  to  count  now, 
for  we  have  entered  the  war  and  must  do  our  part  to 
bring  it  to  a  successful  conclusion.  The  realization  of 
the  staggering  burden  of  the  cost  of  the  war  will  not 
prevent  any  one  of  the  nations  at  war  from  continuing 
to  do  its  part;  but  a  study  of  this  cost  in  all  its  bearings 
may  have  a  sobering  effect  in  years  to  come  when  peoples 
and  rulers  may  perhaps  contemplate  war  again.  For 
that  reason  among  the  preliminary  studies,  which  it  is 
our  purpose  to  publish,  will  be  one  or  two  on  the  cost  of 
the  war  and  its  financial  management. 

A  second  subject  needing  serious  study  is  the  alleged 
trend  toward  Socialism.  Socialists  point  with  rejoicing 
to  the  vast  extension  of  government  control  over,  and 
participation  in,  industry  on  account  of  the  war.  In 
Great  Britain  the  government  is  running  the  railroads 
and  is  virtually  in  absolute   control  of  industry.     The 


EDITOR'S  PREFACE  ix 

railroad  system  is  operated  as  a  unit  for  the  single 
purpose  of  securing  efficiency  in  war  production.  Steel 
and  munition  factories,  many  in  number  and  great  in 
output,  are  entirely  operated  by  the  government. 
Thousands  of  other  factories  have  been  operated  for 
some  time  under  government  control,  although  immedi- 
ately by  the  owners.  It  is  estimated  that  probably 
about  seven  million  men  and  women  are  at  present 
employed  in  industries  under  the  control  of  the  British 
government.  Moreover,  the  government  has  entered  the 
field  of  the  middleman  and  is  doing  collective  buying 
on  a  very  large  scale,  just  as  we  ourselves  are. 

Similar  conditions  prevail  in  France  and  in  Italy. 
The  government  of  Italy  is  said  now  to  control  in  the 
neighborhood  of  2,500  establishments,  with  approxi- 
mately three  million  workers.  In  France  the  control 
of  the  government  over  industry  is  even  more  extended 
and  intense.  Even  countries  not  in  the  war  have  found 
it  necessary,  on  account  of  the  disturbance  of  industry 
and  the  shortage  of  supplies  of  one  kind  and  another, 
to  undertake  economic  functions  in  character  and  extent 
hardly  thought  of  hitherto. 

The  culmination  of  the  whole  process  seems  to  be 
reached  in  the  project  for  collective  purchasing  for  all 
the  Allies  in  the  matter  of  metals,  food  and  other  articles. 

On  the  steps  which  the  United  States  has  taken  it  is 
not  necessary  to  enlarge.  We  are  controlling  the  iron 
and  steel  industry,  the  coal  business,  the  wheat  market, 
and  are  reaching  indirectly  to  the  control  of  retail  trade 
in  a  variety  of  articles. 

These  things  are  welcomed  by  Socialists  as  steps 
towards  the  permanent  establishment  of  Socialism. 
Many  other  people  look  upon  them  with  fear  because 
they  have  the  same  belief.  It  is  important,  therefore, 
to  study  and  discuss  this  trend  and  its  aftermath. 

In  the  opinion  of  the  editor  of  this  series,  a  distinction 
must  be  made  between  Socialism  and  mere  state  economic 


x  EDITOR'S  PREFACE 

activity,  which  may  be  called  stateism.  To  be  sure,  the 
state,  or,  at  any  rate,  the  government  in  a  socialistic 
state,  is  the  active  agent  for  carrying  on  the  economic 
life  of  the  people.  But  government  activity  of  this  kind 
is  not  truly  socialistic  unless  the  purposes  and  the 
methods  of  the  government  reflect  the  desires  and  the 
will  of  the  people.  An  autocratic  state  might  occupy  its 
government  quite  as  fully  with  the  performance  of 
economic  functions  as  could  be  desired  by  any  Socialist, 
but  the  resulting  condition  would  not  be  one  of  Socialism. 
In  short,  the  mere  extension  of  government  economic 
functions  is  not  of  itself  the  establishment  of  Socialism. 
Germany  is  commonly  spoken  of  as  a  state  which  has 
gone  far  on  the  road  to  Socialism.  Not  so.  Germany 
is  an  example  of  stateism.  Her  government  has  in  a 
measure  provided  the  conditions  of  economic  welfare  for 
all  her  people,  but  she  has  done  so  at  the  expense  of  their 
individual  initiative  and  freedom.  A  minority — the 
ruling  class — have  determined  what  should  be  done  for 
the  rest;  and  that  not  primarily  for  the  good  of  the  rest, 
but  in  order  that  they  might  be  more  suitable,  or  useful, 
or  available,  for  the  purposes  of  the  few.  If  such 
economic  comfort  were  achieved  as  a  result  of  the  free 
action  of  the  majority,  it  would  be  Socialism  in  the  true 
sense.  Even  then,  however,  it  is  questionable  whether 
the  attainment  of  a  larger  economic  comfort  through 
Socialism  would  not  entail  a  cost,  in  the  sacrifice  of 
freedom,  that  would  be  in  the  long  run  too  great. 

Whether  the  extension  that  is  taking  place  now  in  the 
war  will  be  socialistic,  even  if  it  is  permanent,  will 
depend,  therefore,  on  the  will  of  the  people ;  for  certainly 
the  government  of  a  democratic  country  cannot  continue 
such  economic  activities  against  the  will  of  the  people. 
Now  the  great  majority  of  the  people  of  the  country 
are  willing  to  submit  to  inconveniences  due  to  the 
extension  of  government  functions  in  unusual  lines  to 
accomplish  more  effectively  the  specific  purposes  of  the 


EDITOR'S  PREFACE  xi 

war.  It  is  more  than  doubtful  whether  they  will  submit 
to  such  inconveniences  and  interferences  when  the 
dangers  of  war  have  passed.  Moreover,  whatever  effi- 
ciency is  gained  in  the  conduct  of  the  war  by  the  exten- 
sion of  the  economic  activities  of  the  government,  is 
secured  very  largely  at  the  price  of  tremendous  inter- 
ference with  ordinary  business  relations,  economic  con- 
ditions, and  ways  of  living,  such  as  the  people  of  this 
country  will  probably  not  endure  excepting  under  the 
stress  of  patriotic  motives.  In  other  words,  in  the 
opinion  of  many,  the  efficiency  necessary  to  win  the  war 
is  gained  at  a  cost  of  interference  in  our  ordinary 
economic  life  that  will  not  be  tolerated  in  time  of  peace. 
There  is  no  more  evidence  today  that  the  government 
performance  of  industrial  and  mercantile  services  will  be 
more  efficient  in  the  future  than  it  ever  has  been;  or 
that  it  will  even  approximate  to  the  efficiency  secured 
by  individual  initiative.  Government  conduct  of  in- 
dustries for  the  purpose  of  conducting  a  war  efficiently 
is  a  very  different  thing  from  such  conduct  for  the 
greatest  service  in  the  more  diverse  purposes  of  human 
life  in  times  of  peace.  Indeed,  what  constitutes  effi- 
ciency in  the  former  conditions  may  be  inefficiency  in 
the  latter. 

As  to  the  alleged  efficiency  of  government  operation 
of  the  railways,  for  example,  we  must  remember  that 
this  efficiency  is  secured  at  a  cost.  Only  those  who  are 
accustomed  to  use  the  railroads  frequently  have  a  suit- 
able realization  of  the  inconvenience  and  loss  injected 
into  private  business  by  the  coordination  and  cooperation 
which  the  war  has  made  necessary  for  the  purposes  of 
the  war.  The  business  of  the  war  is  at  present  impera- 
tive, and  must  displace  everything  else.  Efficiency  in 
carrying  it  on  must  be  attained  without  much  regard  to 
the  cost  involved  in  the  disturbance  of  passenger  and 
freight  traffic  for  other  purposes. 

Those  who  are  now  managing  these  new  activities  of 


xii  EDITOR'S  PREFACE 

the  government  are,  in  the  main,  so-called  captains  of 
industiy  who  have  built  up  under  the  system  of  individ- 
ualism and  competition  the  great  structure  now  available 
for  government  use.  There  is  no  reason  to  think  that 
their  services  would  be  readily  available  for  such  a  pur- 
pose excepting  in  an  emergency.  Their  experience, 
however,  will  undoubtedly  give  them  a  somewhat  dif- 
ferent outlook  after  the  war,  when  the  old  order  of  things 
begins  to  return.  It  is  to  be  hoped  that  they  will  have 
that  higher  point  of  view  and  broader  outlook  concerning 
the  welfare  of  the  public  at  large  which,  by  establishing 
a  higher  ethical  standard  for  business,  will  do  away  for- 
ever with  the  phases  of  capitalistic  exploitation  which 
have  so  justly  drawn  condemnation  in  the  past. 

It  must  be  remembered,  too,  that  if  the  government 
is  to  direct  industry,  it  must  direct  labor.  There  is  no 
reason  to  think  that  the  workers  of  the  country,  whether 
organized  or  unorganized,  are  disposed  to  turn  over  to 
bureaucratic  control  the  determination  of  important  ques- 
tions concerning  their  work  and  their  welfare. 

For  these  reasons  it  seems  to  the  editor  that  the 
present  trend  does  not  necessarily  indicate  a  tendency 
toward  the  permanent  establishment  of  Socialism  prop- 
erly so-called,  nor  even  a  tendency  toward  a  permanent 
extension  of  government  participation  in  economic  life. 
That  there  will  be  some  such  extension  for  a  time  at 
least  is  very  likely,  but  the  general  result  is  just  as  likely 
to  be  the  establishment  of  better  standards  in  the  conduct 
of  privately  conducted  business.  Excessive  profits  and 
other  forms  of  exploitation  will  be  better  understood  by 
the  public;  those  who  have  been  guilty  of  such  practices 
will  be  more  easily  discovered,  and  their  own  point  of 
view  undoubtedly  will  be  largely  modified.  In  other 
words,  the  permanent  result  of  our  present  activity  is 
just  as  likely  to  be  the  conduct  of  business  with  larger 
emphasis  of  service  to  public  welfare  as  an  extension  of 
direct  government  management  and  control. 


EDITOR'S  PREFACE  xiii 

A  third  line  of  study  which  is  brought  prominently  to 
the  attention  of  the  world  by  the  war  is  that  of  national 
economic  independence.  The  war  had  not  been  going  on 
long  before  it  became  evident  to  some  of  the  warring 
nations  that  they  had  allowed  themselves  to  become  com- 
pletely dependent  on  Germany,  for  example,  not  only  for 
some  articles  necessary  for  the  prosecution  of  the  war, 
but  for  many  others  needed  in  ordinary  industries.  Dyes 
are  a  familiar  illustration.  Even  foodstuffs  were  in 
some  cases  obtained  from  enemy  sources  of  supply.  The 
discovery  of  these  conditions  naturally  stirred  people  of 
different  countries,  and  brought  out  anew  a  demand  for 
national  economic  independence  on  the  part  of  each 
nation,  so  that  its  power  to  defend  itself  in  war  would 
not  be  impaired.  Other  motives,  however,  led  to  em- 
phasis of  the  same  demand  as  the  war  progressed.  A 
conference  among  the  Entente  Allies  was  reported  to 
have  been  held  for  the  formation  of  an  economic  alliance, 
to  continue  after  the  war,  the  purpose  being  to  develop 
trade  among  the  Allies  and  their  colonies,  to  the  exclusion, 
so  far  as  possible,  of  the  trade  of  Germany  and  of  her 
allies. 

The  situation  has  intensified  again  the  demands  of  the 
protectionists  and  exponents  of  nationalism,  who,  even  in 
times  of  peace,  advocate  national  economic  self-suffi- 
ciency. For,  of  course,  the  movement  is  not  one  that 
originated  with  the  war.  It  has  come  to  notice  from 
time  to  time  as  one  nation  or  another  has  developed  its 
foreign  trade.  It  is  not  many  years  since  central  Euro- 
pean statesmen  talked  about  a  "  Zollverein,"  or  Mid- 
European  tariff  union  against  the  United  States. 
British  statesmen  have  from  time  to  time  discussed  the 
advisability  of  an  imperial  customs  union  against  the 
rest  of  the  world.  But  the  war  has  given  a  new  em- 
phasis and  a  new  aspect  to  the  proposed  policy,  and  it 
will  need  careful  study  in  order  not  only  to  prevent 
mistakes  on  the  part  of  particular  countries,  but  to  lay 


xiv  EDITOR'S  PREFACE 

the  foundations  for  lasting  peace  on  the  basis  of  inter- 
national amity. 

Of  course,  no  peace  can  be  permanent  if  its  conditions 
are  such  that  each  nation  must  continue  the  struggle  for 
economic  self-sufficiency;  for  a  country  could  be  eco- 
nomically independent  only  if  it  had  within  its  own 
boundaries  all  the  natural  resources  necessary  for  the 
purpose.  National  lines,  however,  are  not  drawn  with 
this  in  view. 

Moreover,  national  self-sufficiency  would  mean  in  the 
long  run  a  restricted  national  life,  for  no  country  could 
have  within  its  own  boundaries  all  the  resources  and 
conditions  necessary  to  satisfy  its  people,  meet  its  re- 
quirements of  defense,  and  enable  it  to  make  progress. 
New  ways  of  living,  new  ideals,  new  culture,  new  con- 
ditions, would  require  changed  economic  methods  and 
different  economic  resources.  Consequently,  self-suffi- 
ciency at  one  time  is  insufficiency  at  another,  so  that 
there  can  be  no  assurance  of  permanence  for  such  a 
policy.  Moreover,  the  country  which  had  resources  that 
prompted  it  to  rise  to  a  higher  civilization  might  still 
be  the  object  of  attack  of  these  which  were  less  fortunate. 
Such  a  policy  would  tend  to  national  isolation  and  the 
destruction  of  intercourse  and  to  act  as  a  check  on  the 
progress  of  civilization.  There  is  no  ideal  worthy  of 
the  world  and  worthy  of  the  peace  which  we  all  hope  to 
establish,  if  not  permanently,  at  any  rate  for  a  long 
period,  excepting  the  ideal  of  free  intercourse,  whereby 
the  resources  of  the  earth  shall  be  made  available  through 
the  processes  and  agents  that  are  most  advantageous  to 
the  whole  world.  But  to  make  the  people  of  the  world 
satisfied  that  an  international  policy  based  on  that  ideal 
is  safe,  it  will  be  necessary  to  find  means  of  insuring  that 
no  one  country  will  find  its  existence  or  independence 
in  danger  because  it  does  not  include  in  its  industrial 
system  all  the  things  and  processes  necessary  to  defend 
itself  against  attack.     In  other  words,  we  must  find  some 


EDITOR'S  PREFACE  xv 

way  of  seeing  to  it  that  aggression  against  a  nation  will 
not  be  possible.  Unless  we  can  do  that,  economic  inter- 
nationalism, after  the  experience  of  the  present  years, 
will  be  merely  a  dream. 

The  practicableness  of  economic  internationalism  will 
depend  in  part,  after  the  war,  on  the  methods  adopted 
by  the  world  for  the  improvement  of  backward  parts  of 
the  earth.  The  colonization  of  Africa  and  the  develop- 
ment of  other  places  will  have  to  be  undertaken  in  some 
way  which  will  preserve  what  may  be  described  as  the 
international  equities.  No  arrangements  can  be  re- 
garded as  morally  justifiable  which  do  not  have  as  their 
first  purpose  the  uplifting  of  the  people  already  oc- 
cupying the  land.  Closely  connected  with  this  question 
is  that  of  the  expansion  of  older  countries  by  immigra- 
tion. One  of  the  arguments  frequently  put  forth  by 
Germans  in  defense  of  the  present  war  is  that  Germany 
needs  territory  for  its  surplus  population.  The  world 
cannot  afford  to  admit  such  a  plea.  Germany  does  not 
need  territory,  although  people  of  German  origin  may 
need  more  space  in  which  to  live.  They  can  get  it,  as 
can  other  people,  by  going  to  less  densely  occupied  parts 
of  the  earth ;  but  they  may  not  in  this  day  and  generation 
insist  that  they  may  take  with  them  also  the  German 
government.  They  are  free  to  settle  and  live  their  lives 
in  other  countries,  and  under  other  flags,  which  admit 
them.  On  such  a  principle  a  constant  flux  and  reflux 
of  population  is  possible  without  impairment  of  the 
rights  of  other  people  or  the  authority  of  other 
governments. 

These  and  other  subjects,  as  has  been  stated,  are 
brought  to  the  forefront  of  public  discussion  by  the 
present  war.  Inasmuch  as  it  is  the  purpose  of  the 
Carnegie  Endowment  for  International  Peace  to  spread 
information  and  add  to  knowledge  in  such  ways  as  will 
bring  about  a  better  understanding  among  the  nations  of 
the  earth,  it  is  proper  that  a  series  of  studies  into  such 


xvi  EDITOR'S  PREFACE 

questions  should  be  undertaken  by  the  Endowment. 
Preliminary  to  more  extended  inquiries  into  these  and 
kindred  subjects,  arrangement  has  been  made  for  their 
early  publication. 

David  Kinley, 
November  28,  1917.  Editor. 


EARLY  ECONOMIC  EFFECTS  OF  THE  WAR 
UPON  CANADA 

To  appreciate  the  true  effect  of  the  great  war  upon 
Canadian  economic  conditions,  it  is  essential  to  realize 
what  was  the  economic  situation  of  the  country  during 
the  period  which  immediately  preceded  the  war.  This 
war  which  burst  upon  the  world  so  suddenly  did  not 
strike  the  Dominion  in  the  midst  of  a  great  period  of 
expansion,  but  rather  at  the  close  of  one.  A  fairly 
prolonged  era  of  exceptional  capital  investment  and 
active  trade  was  drawing  to  an  end,  while  readjustment 
and  stock-taking  were  in  process.  What  the  next  phase 
of  economic  development  might  be  was  the  subject  of 
active  discussion  by  publicists,  financiers,  promoters, 
manufacturers,  and  merchants  alike. 

Canada,  one  of  the  younger  countries,  containing  prob- 
ably the  largest  area  of  unexploited  powers  of  nature 
attractive  to  European  immigrants,  was  especially  inter- 
ested in  the  practical  outcome  of  readjustment.  During 
the  decade  ending  with  1913  the  country  had  undergone 
a  process  of  economic  expansion  which,  in  proportion  to 
its  previous  trade  and  population,  probably  exceeded 
that  of  any  other  country.  The  evidence  for  this  may 
be  found  in  the  correlated  factors  of  the  investment  of 
foreign  capital,  the  building  of  railroads,  the  influx  of 
immigration,  the  expansion  of  towns  and  cities,  and  the 
speculation  in  land  values  connected  therewith,  particu- 
larly in  western  Canada  and  the  eastern  cities  affected 
by  the  western  expansion.  These  factors  naturally  re- 
acted upon  all  other  forms  of  economic  activity  in  the 
country,  making  great  demands  for  goods  and  services 


2  EARLY  ECONOMIC  EFFECTS  OF 

of  all  kinds,  enhancing  prices  and  wages,  stimulating 
industries,  expanding  markets,  and  encouraging  by 
precept  and  example  a  speculative  spirit  throughout 
the   country. 

A  few  central  facts  will  illustrate  the  movement  during 
this  decade.  The  population  of  Canada  between  the 
census  periods  of  1901  and  1911  had  increased  from 
5,371,000  to  7,206,000,  an  increase  of  1,835,000  or 
150,000  more  than  during  the  three  previous  decades.1 
The  percentage  increase  was  greater  than  that  of  any 
other  country.  This  increase  was  chiefly  due  to  im- 
migration; the  number  of  immigrants  arriving  in  the 
country  for  the  census  decade  1901-11  being  1,453,391, 
which  is  within  380,000  of  the  total  increase  of  popu- 
lation for  the  decade.  During  the  three  years  from 
1911  to  1913  the  country  received  a  further  increase 
in  immigration  of  1, 067,753. 2  During  the  decade  of 
1903-13  the  total  trade  of  the  country  had  expanded 
from  $467,000,000  to  $1,085,000,000,  or  nearly  232  per 
cent.  The  expansion  in  imports  was  much  greater  than 
that  in  exports.  Imports  increased  from  $241,000,000 
to  $692,000,000,  being  287  per  cent,  while  exports  in- 
creased from  $225,000,000  to  $393,000,000,  or  180  per 
cent.3  This,  as  we  shall  find,  was  due  to  the  special 
conditions  of  expansion  under  the  influence  of  the  influx 
of  foreign  capital. 

While,  for  the  decade  1903-13,  the  capital  of  the 
Canadian  banks  expanded  only  from  approximately 
$76,500,000  to  $116,000,000,  or  51  2-3  per  cent,  the  note 
circulation  increased  from  $58,750,000  to  $105,500,000, 
or  80  per  cent.  At  the  same  time  dominion  notes,  or 
the  government  legal  tender  notes,  expanded  from 
$39,000,000  to  $116,750,000,  or  practically  200  per  cent. 

1  The  Canada  Year  Book,  1915.  Published  by  Authority  of  the  Minister 
of  Trade  and  Commerce.    Ottawa,  The  King's  Printer,  1916,  p.  64. 

3  Ibid.,  p.  111. 

*  Report  of  the  Department  of  Trade  and  Commerce  for  the  Fiscal  Year 
ended  March  31,  1916,  Part  I,  Canadian  Trade.     Ottawa,  1917,  pp.  6  and  7. 


THE  WAR  UPON  CANADA  3 

Deposits  of  the  public  with  the  banks  increased  from 
$379,000,000  to  $985,000,000,  or  160  per  cent,  while 
bank  loans  to  the  public  increased  from  $406,000,000 
to  $972,000,000,  or  139^  per  cent.  Bank  clearings 
increased  from  $2,750,000  to  $9,250,000.x  On  the  other 
hand,  notwithstanding  the  immensely  increased  capacity 
for  saving  during  the  period,  the  deposits  in  the  Post 
Office  and  Government  Savings  Banks  fell  during  the 
decade  from  $60,750,000  to  $57,000,000.2  This,  how- 
ever, is  quite  in  accordance  with  the  speculative  atmos- 
phere of  the  period.  The  total  dominion  revenue  on 
consolidated  account  expanded  from  $66,000,000  to 
$168,500,000,  while  the  expenditure  on  consolidated 
account,  that  is,  excluding  the  special  capital  expendi- 
ture, increased  from  $51,500,000  to  $112,000,000,  while 
the  total  expenditure  including  capital  investments  in- 
creased from  $61,750,000  to  $144,500,000.3  It  might 
appear  from  the  figures  for  the  beginning  and  ending 
of  the  period  that  a  considerable  surplus  had  been 
accumulated.  During  some  of  the  intermediate  years, 
however,  while  the  railways  and  other  public  works  con- 
structed or  subsidized  by  the  government  were  under 
construction,  the  total  expenditure  greatly  exceeded  the 
total  revenue;  as,  for  instance,  in  1909,  when  the  total 
revenue  was  $85,000,000  and  the  total  expenditure 
$133,000,000.  The  actual  result  for  the  whole  decade 
is  shown  in  the  increase  of  the  national  debt.  The  total 
debt  increased  from  $361,000,000  to  $483,000,000,  but 
this  was  offset  by  public  assets;  in  other  words,  the 
capital  valuation  of  the  government  railroads  and  other 
public  works  for  which  a  considerable  portion  of  the 
total  debt  had  been  incurred.  Deducting  these  assets, 
the    net    debt    had    increased    from    $261,000,000    to 

1  Report  of  Department  of  Trade  and  Commerce,  1916,  Part  IV,  pp.  32 
and  33. 

2  Canada  Public  Accounts  for  Fiscal  Year  ended  March  31,  1916.    Ottawa, 
1917,  pp.   106   and   109. 

*  Public  Accounts,  1916,  pp.  24  and  25. 


4        EARLY  ECONOMIC  EFFECTS  OF 

$814,000,000 11  a  very  modest  increase  it  must  be  ad- 
mitted for  a  rapidly  expanding  country  such  as  Canada. 

The  period  1903-13  being  one  of  rapid  expansion  of 
railroads  and  other  public  works,  we  find  that  the  rail- 
road mileage  in  operation  had  increased  from  18,988  to 
29,304,  or  54  per  cent,  while  the  gross  earnings  increased 
from  $96,000,000  to  $256,500,000,  an  increase  of  166  per 
cent.2 

Some  consideration  is  necessary  as  to  just  how  the 
expansion  indicated  in  these  typical  statistics  affected  the 
country  as  a  whole  and  in  its  several  parts.  Also  in  what 
condition  it  left  the  country  to  meet  the  revolutionary 
economic  changes  occasioned  by  the  outbreak  of  the  war. 
The  first  great  factor  is  of  course  the  enormous  increase 
of  immigration  which  occurred  during  the  period  in 
question,  amounting  to  2,276,252.  Even  allowing  that 
a  considerable  number  of  the  immigrants  did  not  remain 
long  in  the  country,  the  United  States  returns  showing 
an  immigration  from  Canada  to  the  United  States  during 
the  same  period  of  363,6 14,3  still  the  total  increase  of 
the  population  was  very  large  and  involved  a  great 
stimulus  to  the  economic  expansion  of  the  country.  It 
is  an  interesting  fact  that  the  great  majority  of  these 
immigrants  came  to  Canada  with  the  professed  purpose 
of  settling  on  the  land.  The  Canadian  government  had 
solemnly  pledged  itself  by  Act  of  Parliament  and  in 
the  interests  chiefly  of  the  trade  unions  to  assist  only 
two  classes  of  immigrants,  viz.:  those  going  on  the  land 
and  those  entering  domestic  service.  General  observa- 
tion, however,  supported  by  the  census  returns  of  1911, 
indicates  that  the  great  majority  of  the  immigrants,  from 
Great  Britain  at  least,  went  into  the  towns  and  cities. 
They  were  accompanied  also  by  a  good  many  from  the 
older  districts  of  the  eastern  provinces  of  Canada  and 

1  Public  Accounts,  1916,  p.  26. 

2  Report  of  Trade  and  Commerce,  1916,  Part  IV,  p.  47. 

*  From  statistics  furnished  by  Canadian  immigration  officials. 


THE  WAR  UPON  CANADA  5 

even  from  the  older  settled  portions  of  southern  Mani- 
toba. Thus  while  the  urban  population  of  the  country 
increased  by  1,259,165,  the  rural  population  increased  by 
only  576,163.  This  increase  of  rural  population  was 
more  than  represented  in  the  western  provinces.  In  all 
of  the  eastern  provinces  except  Quebec,  the  rural 
population  declined  during  the  decade;  even  in  the 
two  western  provinces  of  Manitoba  and  British  Columbia 
the  increase  in  the  urban  population  considerably  ex- 
ceeded that  in  the  rural.  Thus  in  the  western  provinces 
from  Manitoba  to  the  Pacific  Coast  while  the  rural 
population  increased  by  638,494  the  urban  population 
in  these  almost  entirely  new  districts  increased  by 
478,526.  In  the  previous  decade  the  relative  increases 
in  these  regions  were,  rural  population  399,344;  urban 
population  198,825,  or  as  two  to  one  in  favor  of  the 
rural  population.1 

Almost  the  only  permanent  services  rendered  by  the 
urban  population  in  the  newly  settled  districts  are  those 
of  distribution  and  transportation  of  goods,  with  little 
manufacturing,  except  lumber  in  the  timber  districts  and 
coal  mining  in  Alberta  and  British  Columbia.  It  is 
therefore  an  interesting  question  as  to  how  so  large  an 
urban  population  could  be  maintained  in  a  country  which 
is  chiefly  concerned  with  the  breaking  up  of  new  lands 
and  the  simpler  forms  of  agriculture.  On  a  closer  survey 
it  is  found  that  the  greater  part  of  the  urban  population 
in  the  western  provinces  was  supported  by  the  building 
of  the  railroads  which  opened  up  the  country,  but  more 
especially  through  the  construction  of  the  very  towns  and 
cities  which  grew  up  along  these  railroads  and  into  which 
the  newer  population  poured,  stimulating  and  expanding 
the  general  atmosphere  of  speculation  and  the  promo- 
tion of  local  enterprises  of  a  purely  temporary  nature. 
Needless  to  say,  not  only  was  the  railroad  construction 

Canada  Year  Book  for  1915,  p.  77. 


6        EARLY  ECONOMIC  EFFECTS  OF 

which  pioneered  the  way  into  the  wilderness  financed  on 
borrowed  capital,  but  so  were  practically  all  of  the  towns 
and  cities  which  sprang  up  in  the  wake  of  the  railroad 
construction.  Land  speculation,  in  the  shape  of  in- 
definite subdivisions  and  the  sale  of  town  and  city  lots, 
was  at  the  bottom  of  most  of  the  rapid  expansion  of 
the  western  municipalities  extending  far  beyond  any 
actual  needs  of  the  time. 

What  disguised  from  the  people  of  the  West  the 
purely  temporary  character  of  the  prosperity  of  the 
newer  towns  and  cities  was  the  very  large  amount  of 
business  being  done  in  these  urban  centers  and  the 
exceptional  number  of  people  who  found  very  profitable 
employment,  with  much  consequent  demand  for  housing, 
food,  clothing,  household  equipment,  and  luxuries  of 
various  kinds.  All  this,  however,  was  being  supported 
chiefly  on  borrowed  capital.  When  the  flow  of  capital 
ceased  the  growth  of  the  towns  and  cities  ceased  also. 
Those  employed  in  the  building  trades  must  go  else- 
where or  starve.  On  their  departure  they  left  empty 
houses  and  a  glutted  real  estate  market.  Also  when 
their  high  wages  ceased  to  flow  into  the  coffers  of  the 
local  merchants,  they  too  were  in  distress  and  must  either 
curtail  or  close  up  their  establishments.  Thus  the 
shrinkage  of  the  prosperity  built  up  on  the  very  con- 
struction of  the  towns  themselves  led  to  many  unex- 
pected hardships  for  those  who  remained  and  who  had 
only  the  requirements  of  the  neighboring  settlers  to  sus- 
tain their  urban  businesses,  or,  in  the  case  of  the  larger 
centers,  the  declining  distributing  trade  for  the  smaller 
towns. 

This  process  repeated  in  varying  degrees  from  the 
smaller  towns  to  the  larger  cities  throughout  a  great 
area  such  as  the  Canadian  West,  linked  up  by  ever- 
expanding  railroad  systems,  represented  many  hundreds 
of  millions  of  additional  capital  in  their  construction  and 
equipment  and  naturally  involved  an  immense  stimulus 


THE  WAR  UPON  CANADA  7 

to  the  economic  activity  of  the  country,  while  bringing 
great  volumes  of  trade  and  prosperity  to  the  older  sec- 
tions of  the  country  where  manufactures  of  various 
kinds  had  been  established. 

Such  was  the  period  of  exceptional  expansion  which 
continued  during  the  decade  closing  the  year  before  the 
outbreak  of  the  great  war.  A  few  observations  on  the 
special  effect  of  such  a  period  of  expansion  on  a  half- 
matured  country  such  as  Canada  may  be  necessary  in 
order  that  one  may  appreciate  the  changes  wrought  by 
the  war  conditions. 

In  the  first  place,  the  absorption  of  so  much  of  the 
incoming  population  and  wealth  of  the  country  in  the 
building  of  railroads  and  urban  centers,  prevented  hun- 
dreds of  thousands  of  people  from  going  on  the  land 
or  engaging  in  any  immediately  productive  enterprises. 
The  fact  that  so  much  of  the  capital  and  energy  of 
the  country  was  being  employed  in  the  production  of 
forms  of  wealth  which,  however  attractive  and  desirable 
in  themselves,  yet  represented  no  available  products  to 
meet  popular  needs  for  the  immediate  present  or  future, 
greatly  affected  not  only  the  imports  and  exports  of  the 
country  but  had  an  important  bearing  upon  the  prices 
of  the  standard  articles  of  consumption.  In  all  cases 
the  millions  of  capital  which  were  absorbed  in  the  con- 
struction of  great  public  works,  such  as  railways,  and 
the  building  of  towns  and  cities,  were  expended  very 
rapidly,  while  the  services  to  be  rendered  by  these,  even 
assuming  that  they  might  in  time  amply  repay  the  out- 
lay, would  return  very  slowly.  In  any  case,  only  a 
few  of  the  mercantile  establishments  in  the  expanding 
towns  and  cities  made  any  pretense  of  immediately 
replacing  the  capital  invested  in  them. 

This  being  so,  what  we  find  is  that  during  such  a 
period  of  expansion  there  must  be  but  few  exports  to 
meet  or  replace  the  imports,  which  are  stimulated  by  the 
expenditure  of  scores  of  millions  of  borrowed  capital. 


8        EARLY  ECONOMIC  EFFECTS  OF 

In  fact,  the  investment  of  so  much  borrowed  capital  in 
either  non-productive  or  but  slowly  productive  forms 
means  the  creation  of  a  great  demand  in  the  country 
itself  for  domestic  supplies,  such  as  all  forms  of  food, 
lumber,  coal,  and  other  native  products  which  would 
normally  be  exported.  It  means  also  a  great  increase 
in  the  demand  for  foreign  imports  in  the  way  of  food, 
clothing,  implements,  and  general  supplies  which  are  not 
produced  within  the  country. 

When  we  turn  to  the  statistics  of  Canadian  trade  for 
the  decade  of  expanding  immigration,  great  borrowing 
of  capital  for  railroads  and  other  public  works,  the 
building  of  new  towns  and  cities  and  the  expanding  of 
older  ones,  we  find  that  practically  all  of  the  borrowed 
capital  from  abroad  came  to  Canada  in  the  shape  of 
imported  goods.  The  excess  of  the  import  of  bullion 
over  its  export  was  not  more  than  sufficient  to  meet 
the  normal  needs  for  an  increased  reserve  in  specie 
to  offset  the  normal  expansion  of  paper  currency  required 
to  meet  the  needs  of  an  increased  trade.  Thus  we  find 
that,  for  the  decade  between  1903  and  1913,  imports 
increased  from  $241,000,000  to  $692,000,000,  while  ex- 
ports increased  only  from  $225,000,000  to  $393,000,000, 
the  former  being  an  increase  of  187  per  cent,  while  the 
latter  represented  an  increase  of  only  97  per  cent.1 

In  1899,  for  the  first  time  in  five  years,  the  imports 
exceeded  the  exports,  but  it  was  not  until  1903  that 
the  average  imports  gained  an  ascendency  over  the 
exports.  That  year  they  did  so  to  the  extent  of  about 
$15,250,000.  Thereafter  the  imports  had  decidedly  the 
ascendency  and  by  1913  the  excess  of  imports  had  ex- 
tended to  $298,750,000  for  that  year.  During  the  decade 
the  accumulated  excess  of  imports  over  exports  amounted 
to  $1,164,000,000.2  This  excess  of  imports  represented 
practically  that  portion  of  our  borrowings  abroad  which 

1  Report  of  Trade  and  Commerce,  1916,  Part  IV,  p.  50. 
3  Ibid. 


THE  WAR  UPON  CANADA  9 

were  transmitted  to  Canada.  In  this  there  were  only 
$26,000,000  of  gold,  which  was  not  more  than  necessary 
to  meet  the  additional  requirements  of  the  increased  note 
issues  of  the  government  and  the  banks.  Most  of  the 
borrowings  which  were  not  transmitted  to  Canada  served 
to  offset  the  interest  on  the  national  debt,  which  for  this 
period  amounted  to  upwards  of  $123,000,000/  The 
interest  on  the  provincial  and  municipal  debts  on  railway 
bonds  and  on  many  other  corporate  securities  held  in 
Britain  had  also  to  be  provided  for  out  of  the  borrowings, 
inasmuch  as  the  exports  were  all  offset  in  meeting  only 
a  portion  of  the  imports. 

In  the  course  of  the  year  1912  a  somewhat  uneasy 
feeling  began  to  pervade  the  financial  world  as  to  the 
possibility  of  the  optimistic  or  speculative  spirit  having 
led  to  numerous  doubtful  or  unwise  investments.  In 
consequence  there  ensued  very  generally  throughout  the 
world  during  1913  a  much  more  cautious  spirit.  This 
naturally  applied  more  particularly  to  those  countries 
where  extensive  new  developments  were  taking  place, 
and  thus  included  Canada.  The  curtailment  of  invest- 
ment was  therefore  felt  in  Canada  to  an  increasing 
extent.  The  immediate  result  as  reflected  in  Canadian 
experience  was  a  shrinkage  of  funds  for  public  and  cor- 
porate enterprises,  various  government  enterprises  were 
checked,  the  western  municipalities  had  perforce  to 
curtail  their  expenditures,  the  railroads  diminished  their 
capital  expenditure,  and,  as  an  immediate  effect,  quite 
a  number  of  persons  connected  with  the  extensive  enter- 
prises previously  carried  on  were  thrown  out  of  em- 
ployment. A  check  was  also  put  upon  the  immigration 
of  those  who  sought  employment  in  the  cities.  The 
secondary  consequences  of  these  primary  conditions  were 
revealed  in  a  marked  diminution  in  the  business  of  fur- 
nishing materials  and  equipment  of  construction,  as  also 
in  that  of  supplying  both  the  necessaries  and  luxuries  of 

1  Public  Accounts,  1916,  p.  27. 


10       EARLY  ECONOMIC  EFFECTS  OF 

life,  freely  purchased  by  communities  enjoying  generous 
incomes  whether  from  personal  services  or  profits. 

As  the  most  widespread  and  highly  speculative  ac- 
companiment of  good  times  had  been  the  dealings  in 
urban  and  suburban  real  estate,  especially  in  the  western 
provinces,  there  was  an  immediate  and  effective  check 
in  this  extensive  line  of  speculation,  followed  by  a  very 
pronounced  reaction  in  realty  values  which  continued 
during  the  latter  part  of  1913,  and  was  still  very  marked 
when  the  war  broke  out  in  1914.  There  was  at  once 
a  double  reaction  in  economic  conditions  during  the 
twelve  months  before  the  beginning  of  the  war.  First 
and  most  extensive,  a  reaction  in  purely  speculative 
values;  secondly,  a  shrinkage  in  the  output  of  numerous 
industries  connected  with  the  supply  of  materials  and 
equipment  for  the  building  of  railroads,  towns  and  cities, 
and  the  miscellaneous  equipment,  including  internal  fur- 
nishings, in  thousands  of  public,  business,  and  private 
buildings;  lastly,  and  in  consequence  of  the  foregoing, 
there  was  a  shrinkage  in  the  supply  of  goods  for  the 
daily  wants  of  a  population  which  had  been  rapidly 
increasing  in  numbers  and  purchasing  power. 

In  time,  of  course,  in  Canada  as  in  other  countries, 
there  would  have  been  a  readjustment  of  employment. 
Many  persons  would  have  transferred  from  the  cities 
to  the  country  and  from  employments  which  furnished 
no  immediate  returns  for  the  satisfaction  of  daily  wants 
to  those  which  furnished  such  supplies  alike  for  domestic 
consumption  and  export.  The  war,  however,  was  pre- 
cipitated before  this  readjustment  could  take  place. 
While  there  was  much  unemployment  and  consequent 
distress  throughout  the  country  during  the  winter  of 
1913-14,  there  was  certain  to  have  been  much  greater 
distress  during  the  ensuing  winter  of  1914-15.  The 
fact  that  the  war  burst  upon  the  world  while  Canadian 
economic  conditions  were  in  this  critical  situation  must 
be  kept  steadily  in  mind  in  attempting  to  estimate  the 


THE  WAR  UPON  CANADA  11 

effects  of  the  war  upon  the  economic  condition  of  the 
country. 

One  of  the  most  immediate  and  striking  factors  in  the 
situation  was  the  facility  for  voluntary  recruiting  which 
the  critical  condition  of  lessened  employment  provided. 
Only  those  who  have  been  actively  engaged  in  recruiting 
can  realize  how  many  and  varied  are  the  motives  and 
influences  which  lead  men  to  voluntarily  enlist  for  mili- 
tary service.  In  a  war  such  as  the  present  where  so 
much  that  is  vital  to  the  very  existence  as  well  as  the 
civilization  of  the  race  is  at  stake,  there  is  room  for  the 
very  widest  range  and  combination  of  motives  in  taking 
up  arms.  But  whether  the  motives  be  of  a  higher  or 
of  a  lower  type  or,  as  in  the  great  majority  of  cases, 
of  some  intermediate  quality,  the  fact  that  a  great  many 
persons  find  themselves  free  to  enlist  in  the  sense  of 
not  having  any  fixed  employment  or  business  engage- 
ments that  cannot  easily  be  postponed,  was  a  very  im- 
portant factor  in  leading  to  such  an  immediate  and  ready 
response  to  the  call  to  join  the  colors  and  to  risk  every- 
thing in  the  service  of  the  country.  Such  was  the 
situation  in  Canada  when  the  war  broke  out. 

One  immediate  effect  of  the  war  was  to  greatly 
increase  the  paralysis  of  trade  and  industry,  as  also 
the  financial,  transportation,  and  other  interests  depend- 
ing upon  them,  and  thus  to  enlarge  the  field  of  unem- 
ployment actually  and  prospectively.  Of  the  large 
numbers  who  found  themselves  actually  or  in  prospect 
without  employment,  the  number  of  recent  immigrants 
from  Britain,  chiefly  located  in  the  newer  urban  centers 
of  the  West  and  in  the  larger  cities  of  the  East,  naturally 
constituted  a  large  proportion.  Thus  one  of  the  earliest 
and  most  important  economic  effects  of  the  war  was  the 
relief  of  the  congested  condition  of  the  labor  market  at 
the  time  of  its  outbreak.  A  secondary  and  important 
consequence  was  that  the  assigned  pay  and  separation 
allowances  which  were  arranged  for  the  wives  and  de- 


12       EARLY  ECONOMIC  EFFECTS  OF 

pendents  of  the  enlisted  soldiers  provided  for  the  essential 
wants  of  many  who  would  otherwise  have  been  in  distress 
by  reason  of  the  head  of  the  household  being  wholly  or 
partially  out  of  employment.  When  these  allowances  to 
the  dependents  were  speedily  supplemented,  in  all  neces- 
sary cases,  by  payments  from  the  Patriotic  Fund,  derived 
from  voluntary  subscriptions,  the  general  distress  due  to 
unemployment  was  almost  at  an  end  and  cannot  recur 
before  the  close  of  the  war  at  least. 

Naturally  those  native  Canadians  who  felt  most 
strongly  the  responsibility  to  respond  to  the  call  of 
their  country,  whether  having  at  the  time  of  the  out- 
break of  the  war  permanent  occupations  or  not,  were 
among  the  first  to  offer  their  services  and  swelled  the 
numbers  of  those  presenting  themselves  for  enlistment 
in  the  early  months  of  the  war.  In  fact,  at  this  stage 
of  the  conflict  the  military  authorities  had  many  more 
offers  of  enlistment  than  they  could  possibly  provide 
for.  Evidently  impressed  by  the  readiness  of  so  many 
citizens  to  enlist,  the  government  estimated  that  there 
would  be  little  difficulty  in  securing  as  volunteers  all 
the  troops  required  and  perhaps  more  than  the  civil 
requirements  of  the  country  could  spare.  As  the  gravity 
and  duration  of  the  war  began  to  be  more  fully  realized 
the  offers  of  troops  by  the  Canadian  government  rapidly 
expanded.  Immediately  on  the  outbreak  of  the  war 
30,000  men  and  supplies  were  offered.  Then  in  July, 
1915,  150,000  troops  were  promised.  In  October,  1915, 
the  number  was  increased  to  250,000.  Finally,  on 
January  1,  1916,  the  numbers  promised  were  raised 
to  500,000/  As  we  shall  have  occasion  to  observe,  this 
larger  number  proved  more  difficult  to  find  on  the 
voluntary  principle  than  was  at  all  anticipated  in  the 
early  stages  of  the  war. 

The  rapid  enlistment  during  the  first  year  of  the  war 
would  itself  have  prevented  the  unemployment  problem 

1  Unrevised  Hansard,  Jan.  17,  1916,  p.  25. 


THE  WAR  UPON  CANADA  13 

from  becoming  a  matter  of  any  great  difficulty.  But  the 
immediate  revival  of  the  national  borrowings  and  ex- 
penditure on  a  rapidly  developing  scale,  and  the  trans- 
formation into  munition  factories  of  many  of  the  largest 
manufacturing  establishments  of  the  country,  whose 
businesses  had  been  severely  checked  by  the  previous 
period  of  reaction,  resulted  in  a  sharp  transition  from 
stagnation  to  feverish  production.  This  was  particularly 
true  of  those  industries  connected  with  iron  and  steel, 
clothing,  leather,  vehicle,  and  other  supplies  called  for  in 
connection  with  war  equipment.  This  immediately  stim- 
ulated the  demand  for  all  forms  of  labor. 

Again,  the  rapid  development  of  munition  industries, 
the  transport  of  large  quantities  of  raw  materials  to  be 
converted  into  finished  articles,  the  enormous  movements 
of  troops  with  all  their  personal  and  camp  equipments 
and  food  supplies,  not  only  greatly  augmented  the 
import  and  export  of  various  lines  of  supplies,  but 
incidentally  led  to  a  remarkable  expansion  of  the  trans- 
portation services  and  the  industries  subsidiary  to  them, 
still  further  increasing  the  demand  for  labor  and  many 
other  forms  of  supplies.  Thus  between  the  demand  for 
men  as  troops  and  as  workmen,  the  condition  of  business 
stagnation  and  unemployment  in  which  Canada  found 
itself  when  the  war  broke  out  and  for  some  weeks  after- 
wards, was  rapidly  dissipated  by  a  new,  strange,  and 
wholly  abnormal  situation  incidental  to  the  outbreak  of 
war.  The  situation  was  marked  by  an  unlimited  demand 
for  men,  materials,  and  supplies  at  ever-increasing  prices 
and  rates  of  remuneration,  the  whole  financed  by  rapidly 
succeeding  loans  doubling  and  trebling  their  predecessors 
each  year. 

One  of  the  most  important  features  in  connection  with 
this  economic  revolution  was  the  fact  that  practically  none 
of  this  borrowing,  manufacturing  and  price  making  which 
prevailed  proceeded  on  the  basis  of  ordinary  economic 
investment,  production,  and  marketing.    In  borrowing 


14        EARLY  ECONOMIC  EFFECTS  OF 

the  funds  to  be  expended,  there  was  no  longer  any 
question  as  to  whether  the  returns  to  be  expected  would 
replace  any  part  of  the  capital  or  meet  the  interest, 
much  less  furnish  a  margin  of  profit.  No  economic 
return  was  expected  from  most  of  the  goods  supplied 
or  the  services  rendered.  Almost  all  economic  activities 
became  subsidiary  to  the  prosecution  of  the  war,  and  in 
meeting  the  demands  of  the  state  for  men  and  supplies, 
prices  and  rates  were  made  without  reference  to  whether 
industry  could  be  maintained  at  the  cost  of  production 
and  the  rates  of  profit  and  remuneration  for  services 
which  were  soon  prevailing.  This  does  not  altogether 
mean  that  there  was  no  competition  in  business,  or  that 
the  rates  established  by  public  institutions,  such  as  those 
governing  railway  transportation,  were  entirely  disre- 
garded. But  it  does  mean  that  where  the  ultimate  de- 
mand for  finished  products  and  services  emanated  from 
the  Canadian,  British,  or  allied  governments  who  had 
no  thought  of  economic  returns  but  only  of  speedy  and 
adequate  supplies  for  the  conduct  of  the  war,  the  ultimate 
question  was  not  whether  the  prices  or  profits  were  rea- 
sonable or  unreasonable,  economically  possible  or  not,  but 
simply  at  what  effective  and  necessary  rates  the  indis- 
pensable supplies  and  services  could  be  obtained. 

In  this  connection  it  is  worth  noting  that  as  far  as 
the  prosperity  which  results  from  an  active  period  of 
production  and  high  prices  is  concerned,  there  is  no 
difference  between  the  investment  of  funds  in  enterprises 
which  will  prove  highly  remunerative  to  the  investors, 
or  in  enterprises  which  will  prove  to  be  entirely  un- 
profitable even  to  the  extent  of  losing  the  whole  or  at 
least  the  greater  part  of  the  capital  invested.  It  is  only 
when  an  enterprise,  in  which  capital  is  invested  and  which 
is  beneficially  promoting  trade  and  industry,  comes  to 
the  practical  test  as  to  whether  its  output  of  goods  or 
services  at  prevailing  rates  will  make  an  adequate  return 
on  the  expenditure,  that  the  question  of  profit  or  loss 


THE  WAR  UPON  CANADA  15 

to  the  investors,  and  therefore  to  the  communities  served, 
is  determined.  While  the  capital  is  being  invested  the 
stimulus  to  trade  and  industry  is  just  as  great  from  the 
enterprise  doomed  to  failure  as  from  one  destined  to 
success.  So  in  the  case  of  the  expenditure  on  war.  The 
prosperity  due  to  the  disbursements  of  large  war  loans 
is  as  beneficial  to  the  trade  and  industry  of  the  country, 
while  the  expenditure  continues,  as  if  it  were  made 
with  the  most  certain  prospect  of  ample  returns  on  the 
funds  expended.  Only  after  the  war  expenditure  is 
completed  and  no  economic  returns  are  forthcoming  to 
replace  the  wealth  destroyed  do  the  unfortunate  con- 
sequences make  themselves  felt,  in  the  absence  of  any 
replacement  of  the  capital  expended,  with  which  to  meet 
the  next  stage  of  capital  production.  At  the  same  time, 
the  interest  on  the  vanished  wealth  requires  to  be  met, 
while  new  efforts  are  called  for  to  replace  the  vanished 
funds.  This  double  burden  of  replacing  wasted  capital 
and  paying  the  interest  on  what  has  vanished  falls  upon 
the  remaining  industry  and  capital  of  the  country.  The 
measure  of  the  burden  thus  imposed  is  the  proportion 
which  the  capital  destroyed  bears  to  that  which  remains, 
making  allowance  in  the  case  of  individual  countries  for 
new  capital  which  may  be  borrowed.  At  the  same  time 
one  recognizes  the  additional  burdens  entailed  by  bor- 
rowed capital  as  compared  with  the  accumulations  of 
domestic  savings. 

Up  to  the  present,  however,  Canada  knows  practically 
nothing  of  this  unfortunate  aftermath,  for  even  the  in- 
terest on  past  war  loans  is  being  met  from  new  loans 
or  the  excess  profits  tax,  which  latter  is  only  part  of 
the  exceptional  capital  expenditure  due  to  war  conditions. 
The  prosperity  of  those  immediately  concerned  in  the 
production  of  war  supplies  and  services  has  already 
extended  to  those  other  economic  classes  who  cater  to 
these  primary  beneficiaries,  whether  in  the  way  of  sup- 
plying raw  materials,  secondary  goods  and  instruments 


16        EARLY  ECONOMIC  EFFECTS  OF 

for  production,  or  in  the  way  of  meeting  their  daily 
wants  in  the  lines  of  food,  clothing,  housing,  fuel,  trans- 
portation, amusements,  and  luxuries  of  various  kinds. 

On  the  other  hand,  high  earnings  and  high  profits 
lead  to  increased  personal  expenditure,  thus  making  an 
increased  demand  not  only  for  all  manner  of  the  neces- 
saries of  life  but  for  most  of  its  luxuries  as  well. 
Further,  where  light  labor  and  personal  services  are 
in  demand  there  are  increased  openings  for  women  and 
the  junior  members  of  families.  Thus  a  larger  pro- 
portion of  the  total  population  left  in  the  country  after 
the  departure  of  the  troops  is  finding  profitable  employ- 
ment. When  there  is  added  to  this  the  further  fact  that 
supplementary  allowances  are  made  to  the  wives  and 
families  of  most  of  the  overseas  troops,  it  is  obvious  that 
an  exceptionally  large  spending  fund,  in  proportion  to 
the  total  population,  is  in  circulation.  This  manifests 
itself  not  only  in  exceptional  demands  for  the  ordinary 
means  of  life,  but  also  for  most  of  the  luxuries  and 
amusements  available  for  modern  urban  dwellers.  As 
will  be  pointed  out  later,  these  broad  facts  are  effectively 
exhibited  in  the  trade  statistics  of  the  country. 

Only  those  who  receive  fixed  salaries  or  other  un- 
expansible  incomes,  in  the  way  of  annuities  and  returns 
from  permanent  investments,  suffer  without  compen- 
sation from  the  ever-increasing  prices  which  prevail. 
High  prices,  however,  may  outrun  even  the  increasing 
profits  and  wages  obtained  by  those  in  the  secondary 
economic  classes  dependent  upon  the  primary  benefi- 
ciaries of  war  supplies  and  service.  As,  however,  these 
classes  are  either  well  organized  or  have  other  methods 
of  protecting  themselves  by  insisting  upon  increases  in 
wages  and  profits,  there  results  a  general  clamor  for 
increased  incomes  and  diminished  outlay.  In  the  latter 
case  this  takes  the  form  of  demands  for  lower  prices 
for  at  least  the  most  essential  requirements  of  life. 
These  claims  tend  eventually  to  concentrate  upon  the 


THE  WAR  UPON  CANADA  17 

government  in  the  form  of  somewhat  antagonistic  de- 
mands upon  our  rulers  for  at  once  increased  wages  and 
diminished  prices.  Since  the  government  itself  has 
emancipated  its  operations  from  the  conditions  of  all 
ordinary  economic  production  and  consumption,  the 
unreflecting  masses  are  apt  to  demand  that  it  should 
do  for  the  people  at  large  what  it  has  been  able  to 
do  for  itself.  In  a  word,  there  seems  to  be  no  valid 
reason  why  the  government  should  not  forthwith  abolish 
by  Order  in  Council  the  old  aphorism  "  ex  nihilo  nihil 
fit." 

In  any  case,  the  general  economic  outcome  of  the  war, 
after  nearly  three  years  duration,  is  that  the  country  has 
been  converted  from  a  condition  of  economic  depression, 
with  growing  anxiety  in  industrial  and  commercial 
centers,  into  a  condition  of  exceptional  prosperity  with 
high  wages  and  ready  employment,  and  with  high  profits 
in  large  volume  followed  by  increased  and  even  lavish 
expenditure.  This  condition,  accompanied  by  great  for- 
eign demand  for  the  staple  means  of  life,  is  resulting 
in  very  high  prices  without,  however,  any  corresponding 
increase  in  supplies,  because  the  profits  and  incomes 
obtainable  in  the  urban  centers  still  exceed  those  in  the 
rural  districts.  In  a  word,  the  economic  condition  of 
the  country  has  come  to  be  entirely  dominated  by  the 
war,  and  is  therefore  increasingly  artificial  and  abnormal 
in  almost  every  line  of  activity. 

Having  outlined  the  general  situation  of  Canada  for 
the  decade  immediately  preceding  the  outbreak  of  the 
great  war  and  having  shown  what  was  the  more  or  less 
critical  condition  of  the  country  at  the  time  of  the  dec- 
laration of  war,  and  also  having  given  a  general  indication 
of  the  temporary  economic  revolution  which  has  been 
produced  by  war  conditions,  we  are  now  in  a  position 
to  appreciate  the  significance  of  the  concrete  facts  re- 
lating to  the  various  phases  of  the  economic  activity  of 
Canada  and  its  relations  to  foreign  countries  and  world 


18        EARLY  ECONOMIC  EFFECTS  OF 

conditions.  We  may  deal  first  with  the  general  trade 
of  the  country,  then  extend  our  survey  to  the  underlying 
and  conditional  factors  of  production  including  labor 
conditions  and  prices,  transportation,  exchange,  and 
finance,  national  and  corporate. 

As  we  have  seen,  Canadian  imports,  reckoned  accord- 
ing to  the  fiscal  year  ending  the  31st  of  March,  cul- 
minated in  a  maximum  of  $686,000,000,  exclusive  of 
coin  and  bullion,  in  1912-13,  or  $670,000,000  for  domestic 
consumption.  During  the  year  of  partial  reaction  pre- 
ceding the  war,  imports  not  only  ceased  to  expand  but 
receded  by  over  $50,000,000,  falling  to  $618,500,000 
for  domestic  consumption.  During  the  following  year, 
1914-15,  covering  eight  months  of  the  war,  they  receded 
another  $163,000,000,  dropping  to  $455,000,000  for 
domestic  consumption.  During  the  year  1915-16,  en- 
tirely under  war  conditions,  owing  to  the  immensely 
augmented  expenditures  of  the  government  and  the 
revival  of  manufacturing  on  a  large  and  profitable  scale, 
with  the  incidental  benefit  of  a  bountiful  harvest,  not 
only  was  the  downward  tendency  of  imports  arrested  but 
the  tide  was  turned  in  an  upward  direction  to  the  extent 
of  over  $50,000,000,  the  total  amounting  to  $507,000,000 
for  domestic  consumption.1  The  continuing  tide  of  pros- 
perity for  the  past  year,  1916-17,  has  led  to  a  still  greater 
increase  of  imports.  The  preliminary  returns  for  the 
fiscal  year  of  1916-17  show  that  the  imports  amounted 
to  $845,000,000  for  domestic  consumption  and  exclusive 
of  coin  and  bullion.2  This  represents  an  increase  over 
the  year  ended  1916  amounting  to  $337,400,000,  repre- 
senting over  66  per  cent;  it  also  represents  an  increase 
of  $175,000,000  over  the  imports  of  the  year  1912-13, 
which  as  we  have  seen  was  the  previous  high-water  mark 
of  importation.  Of  course,  as  we  shall  see,  some  allow- 
ance must  be  made  for  an  increase  in  prices. 

1  Trade  and  Commerce  Report  for  1916,  Part  1,  p.  7. 

2  Weekly   Bulletin,  Department   of   Trade   and   Commerce,   May   7,   1917, 
p.  1116. 


THE  WAR  UPON  CANADA  19 

We  turn  now  to  exports  as  affected  by  the  war.  We 
have  already  seen  that  while  for  the  year  1912-13  imports 
had  reached  a  maximum  of  $686,000,000  the  exports  had 
risen  to  only  $377,000,000,  including  foreign  produce  but 
excluding  coin  and  bullion.  This  was  not  much  more 
than  half  the  amount  of  the  imports.  The  following 
year,  however,  1913-14,  the  last  before  the  war,  while 
the  imports  fell  by  $50,000,000,  the  exports  increased  by 
over  $75,000,000,  to  a  total  of  $455,000,000.  During 
the  first  year  of  war,  1914-15,  the  exports  increased  only 
$6,000,000  to  $461,000,000.  Since,  however,  the  imports 
fell  off  very  greatly,  there  was  a  difference  of  only 
$36,000,000  in  favor  of  imports.  For  the  second  year 
of  the  war,  1915-16,  the  balance  was  heavily  turned  in 
favor  of  exports,  the  total  having  risen  to  $779,000,000, 
an  increase  of  not  less  than  $318,000,000,  or  68  per  cent.1 
From  the  preliminary  returns  for  the  year  1916-17,  we 
find  that  the  exports  amounted  to  $1,179,000,000,  an 
increase  of  $400,000,000,  or  over  51  per  cent.2  Great 
as  is  this  increase  it  is  not,  however,  as  great  in  pro- 
portion as  that  for  imports  for  this  year,  which  amounted 
to  66  per  cent. 

When  we  turn  to  the  items  which  make  up  the  in- 
creased exports  we  find  that  the  greatest  increase  during 
the  war  period  has  been  in  manufactures,  which  have 
risen  from  $54,000,000  for  the  twelve  months  ending 
December,  1913,  through  $69,000,000  for  the  year  1914, 
to  $191,000,000  for  the  year  1915,  and  $440,000,000  for 
the  year  1916.  This,  of  course,  represents  chiefly  war 
munitions.  The  next  largest  increase  was  in  agricul- 
tural products,  apart  from  animal  products.  These  in- 
creased from  $127,000,000  in  1914  to  $364,000,000  in 
1916.  Next  come  animal  products,  increasing  from 
$68,000,000  in  1914  to  $117,000,000  in  1916.  For  the 
same  calendar  years,  1914-16,  the  products  of  the  mine 

1  Trade  and  Commerce  Report  for  1916,  Part  I,  p.  6. 
'Weekly  Bulletin,  May  7,  1917,  p.  1116. 


20       EARLY  ECONOMIC  EFFECTS  OF 

increased  from  $53,000,000  to  $81,000,000;  the  fisheries 
from  $18,000,000  to  $24,000,000,  and  the  forest  products 
from  $41,000,000  to  $55,000,000/ 

A  closer  analysis  of  the  exceptional  increase  in 
manufactures  between  1914  and  1916,  amounting  to 
$371,000,000  or  a  fivefold  increase  over  1914,  reveals 
certain  important  facts  bearing  on  the  economic  effects 
of  the  war.  The  chief  articles  making  up  this  great 
increase  were  cartridges,  including  shells  of  every  de- 
scription. Before  the  war  the  export  of  these  was  wholly 
negligible.  They  began  to  be  sent  forward  in  large 
quantities  only  in  December,  1915,  but  from  that  to  the 
end  of  1916  $231,000,000  worth  have  been  shipped. 
Before  December,  1915,  less  than  $3,000,000  worth  had 
been  shipped  during  the  first  sixteen  months  of  the  war.2 
Other  explosives  accounted  for  an  increase  of  $28,000,000 
during  1916,  while  before  that  less  than  $2,000,000  had 
been  exported  during  the  war  period.3  For  the  first 
two  months  of  1917  an  additional  $41,000,000  of  cart- 
ridges and  $8,000,000  of  other  explosives  had  been 
shipped.4  Cartridges  and  explosives  accounted  for  over 
two-thirds  of  the  increase  in  exports  from  the  outbreak 
of  the  war.  Another  large  increase  was  in  gasolene 
launches,  which  before  1916  had  not  amounted  to  above 
$10,000  worth  for  a  year.  During  the  year  1916,  how- 
ever, they  were  exported  to  the  extent  of  $7,250,000,5 
and  in  January,  1917,  an  additional  $7,900,000  were 
shipped.6  Leather  and  leather  goods  accounted  for  a 
considerable  increase  in  manufactures,  but  there  was  much 
variation  in  this  line.  The  most  pronounced  increase  was 
in  harness  and  saddlery,  of  which  only  a  few  thousand 
dollars'  worth  had  been  exported  before  the  war.     In 

1  Trade  and  Commerce  Report  for  1916,  Part  I,  p.  xx. 

2  Ibid.,  p.  xxii. 
'  Ibid. 

*  Trade  and  Commerce   Monthly  Reports,  Jan.,   1917,  p.   1357,  and   Feb., 
1917,  p.  1667. 

•Trade  and  Commerce  Report  for  1916,  Part  I,  p.  xxii. 

•  Trade  and  Commerce  Monthly  Report,  Jan.,  1917,  p.  1385. 


THE  WAR  UPON  CANADA  21 

November,  1914,  however,  there  began  quite  an  excep- 
tional increase  in  these  exports  to  Europe,  chiefly  to 
Great  Britain,  France,  and  Russia.  The  amount  rapidly 
rose  in  a  few  months  to  over  $2,000,000  in  March,  1915, 
and  the  export  was  well  sustained  until  August  of  that 
year.  Thereafter,  however,  it  fell  off  rapidly,  with  a 
slight  increase  in  the  spring  of  1916.  Since  then  the 
export  has  shrunk  to  almost  prewar  conditions.1 

The  export  of  iron  and  steel  manufactures  has  greatly 
increased.  Before  the  war  Canada  exported  from 
$8,000,000  to  $10,000,000  in  these  lines,  from  a  half  to 
three-quarters  of  which  consisted  of  agricultural  imple- 
ments. But  while  these  fell  off  by  more  than  a  half 
during  the  second  and  third  years  of  the  war,  the 
total  export  of  iron  and  steel  manufactures  rose  from 
$11,000,000  in  1914  to  $14,000,000  in  1915,  and  $54,- 
000,000  in  191 6. 2  These  represent  largely  miscella- 
neous products  sent  to  Great  Britain. 

Other  manufactured  articles  in  which  there  has  been 
a  considerable  increase  during  the  war  are  clothing,  which 
reached  a  maximum  of  $11,250,000  in  the  six  months 
from  December  to  May,  1915,  but  soon  fell  off  again  to 
less  than  one-third  of  that  amount  for  the  corresponding 
period  in  1916,  while  in  the  last  six  months  of  1916  the 
export  amounted  to  only  $716,000.  Drugs  and  chemi- 
cals have  also  steadily  increased  from  about  $6,000,000 
in  1915  to  nearly  $9,000,000  in  1916.3 

Of  the  agricultural  products  exported  the  greatest 
increases  have  occurred  in  wheat  and  wheat  flour  and 
oats.  The  exports  of  wheat  rose  rapidly  in  the  autumn 
of  1914,  yet  the  harvest  of  that  year  was  not  good  and 
the  amounts  exported  for  the  first  nine  months  of  the 
following  year,  1915,  were  on  the  whole  not  more  in 
value  and  less  in  quantity  than  the  normal  exports  before 
the  war.    With  the  incoming  of  the  exceptional  harvest 

1  Trade  and  Commerce  Report,  1916,  Part  I,  p.  xxiii. 
a  Ibid.,  p.  xxiv.  *  Ibid.,  p.  xxii. 


22        EARLY  ECONOMIC  EFFECTS  OF 

of  1915  there  was  naturally  an  enormous  increase  in  the 
export  of  Canadian  wheat  to  Europe.  During  the  first 
nine  months  of  that  year  the  monthly  export  had  not 
ranged  beyond  $3,500,000  to  $7,500,000,  except  in  June 
when  it  rose  to  $10,000,000.  In  the  autumn  of  1915, 
however,  the  monthly  exports  suddenly  increased,  rising 
to  nearly  $33,000,000  in  October,  followed  by  $44,000,000 
in  November  and  $39,000,000  in  December.  In  April  of 
the  following  year,  1916,  extensive  shipments  were  re- 
sumed, ranging  from  $14,500,000  to  $34,500,000  per 
month.  Owing  to  the  autumn  shipments  the  total  for 
1915  was  increased  to  $166,000,000,  70  per  cent  of  which 
had  been  contributed  in  the  last  three  months  of  the 
year.  The  total  for  1916  amounted  to  $239,000,000/ 
A  rise  in  prices,  as  we  shall  see,  accounted  for  some 
proportion  in  the  increase  but  not  as  much  as  might 
be  expected.  The  statistics  as  to  quantities  exported 
are  available  only  to  the  end  of  the  fiscal  year  in  March, 
1915-16.  For  the  last  four  years  quantities  and  values 
compare  as  follows: 

1912-1913  1913-1914  1914-1915  1915-1916 

Bushels 93,100,000  120,410,000  71,900,000  157,700,000 

Value $88,600,000        $117,700,000  $74,200,000  $172,800,000 ' 

The  export  of  flour,  depending  much  more  upon  the 
capacity  of  the  mills  than  upon  the  harvest,  did  not 
expand  to  any  considerable  extent  until  the  fiscal  year 
1915-16.  There  was,  however,  a  very  considerable 
expansion  in  values  at  least  during  the  latter  part  of 
1915  and  throughout  1916,  the  totals  for  these  years 
being  $31,000,000  and  $46,000,000  respectively.3  As  in 
so  many  other  cases  the  diminished  consumption  in  the 
country  due  to  the  decrease  in  population  tended  to 
provide  a  corresponding  increase  in  exports.  Moreover, 
the  feeding  by  Canada  of  its  own  soldiers  overseas  caused 

1  Trade  and  Commerce  Report  for  1916,  Part  I,  p.  xxii. 

2  Ibid.,  p.  684. 

3  Ibid.,  p.  xxii. 


THE  WAR  UPON  CANADA  23 

the  amounts  supplied  to  appear  in  the  exports  of  the 
country. 

There  was  a  rapid  increase  in  the  export  of  oats  in 
the  autumn  of  1914  and  which  was  resumed  in  the 
spring  of  1915.  The  irregularity  of  shipping  conditions 
caused  considerable  variation  in  the  export  of  oats  for 
individual  months.  Thus  in  May,  August,  September, 
November,  and  December  of  1915  the  shipments  were 
over  $1,000,000  worth  per  month,  whereas  in  some  of 
the  intermediate  months  the  exports  did  not  amount  to 
more  than  one-half,  one-third,  or  even  one-sixth  of 
that.  The  total  exports  for  the  year  1914-15  rose  to 
$10,000,000,  but  the  following  year  when  the  shipments 
were  somewhat  more  steady  the  total  amounted  to 
$35,000,000.1  The  increase  for  this  period  was  chiefly 
to  France,  the  amount  going  to  Great  Britain  being 
offset  by  the  diminished  amount  going  to  the  United 
States.  The  price  of  oats  proportionately  increased 
more  than  that  of  wheat  as  indicated  in  the  following 
rates: 

1913-1914  1914-1915  1915-1916 

Bushels 35,000,000  17,700,000  26,800,000 

Value $13,300,000  $8,900,000  $14,600,000  * 

There  was  no  increase  in  the  export  of  potatoes  as 
due  to  the  war,  but  rather  the  reverse.  The  great 
increase  in  the  price  of  potatoes  and  certain  other  vege- 
tables during  1916-17  was  due  to  the  very  unfavorable 
weather  of  1916,  which  greatly  reduced  the  crops  of  roots 
and  vegetables.  There  was,  however,  a  considerable 
increase  in  the  export  of  vegetables  other  than  potatoes, 
both  in  the  shape  of  canned  goods  and  in  other  forms. 
The  total  value  of  the  exports,  however,  up  to  the 
fiscal  year  ending  March,  1916,  did  not  exceed  $500,000.3 

The  effect  of  the  war  upon  the  export  of  hay  resulted 

1  Trade  and  Commerce  Report  for  1916,  Part  I,  p.  xxii. 
"Ibid.,  p.  682. 
3  Ibid.,  p.  730. 


24        EARLY  ECONOMIC  EFFECTS  OF 

in  a  change  of  destination  from  the  United  States,  to 
which  most  of  it  had  previously  gone,  to  England  and 
France,  especially  the  latter  country.  From  the  fiscal 
year  ending  in  1912  to  that  ending  in  1915  there  had 
been  a  rapid  decline  in  the  export  of  hay,  from  784,000 
tons  to  131,000  tons.  During  1915-16  the  export  rose 
to  255,000  tons,  about  half  of  which  went  to  France. 
The  value  of  hay  was  practically  doubled  between  1915 
and  1916.1 

The  next  important  line  of  export  stimulated  by  the 
war  was  that  of  animals  and  animal  products.  The 
results,  however,  were  far  from  uniform  and  much  in- 
fluenced by  other  currents  than  those  of  the  war  demand 
directly.  In  other  words,  the  war  conditions  tended  at 
one  period  to  increase  exports  and  at  another  to  diminish 
them.  This  was  due,  of  course,  chiefly  to  the  conditions 
affecting  transportation.  In  the  matter  of  cattle  of  one 
year  old  and  upwards,  the  export  for  the  year  before 
the  war  amounted  to  over  $7,500,000.  For  the  first  of 
the  two  years  of  the  war  the  value  of  the  exports  rose 
to  $8,750,000  and  the  next  year  to  $12,000,000.2  The 
increase,  however,  was  entirely  to  the  United  States, 
inasmuch  as  the  export  to  Britain,  which  was  only  about 
$700,000  the  year  before  the  war,  was  practically  para- 
lyzed for  lack  of  shipping  facilities.  As  a  matter  of  fact 
meat  had  to  be  shipped  to  Europe  in  a  dressed  or 
packed  condition.  Thus  the  export  of  beef,  which  had 
increased  rapidly  from  948,000  pounds  in  1911-12  to 
13,000,000  pounds  in  1914,  continued  to  increase  for  the 
first  two  years  of  the  war  from  18,750,000  pounds  in  1915 
to  47,500,000  in  1916.3  The  increase  in  value,  however, 
was  much  more  rapid,  being  about  50  per  cent  in  the  two 
years  of  the  war  as  compared  with  the  last  year  of  peace. 
Not  much  beef  had  been  shipped  to  Great  Britain  before 

1  Trade  and  Commerce  Report,  1916,  Part  I,  p.  754. 
'Ibid.,  p.  645. 
*  Ibid.,  p.  721. 


THE  WAR  UPON  CANADA  25 

the  outbreak  of  the  war,  owing  to  the  great  demand  with 
high  prices  in  Canada  itself  during  the  period  of  rapid 
expansion.  The  diminished  consumption  at  home,  how- 
ever, and  the  high  prices  abroad  greatly  increased  the 
exports  to  Britain.  They  rose  from  190,000  pounds  in 
1913-14  to  1,330,000  pounds  in  1915  and  to  13,912,000 
pounds  in  1915-16.  The  United  States  shared  with 
Great  Britain  in  the  increased  exports  of  Canadian  beef 
after  the  close  of  the  expansion  period  in  Canada.1 

One  of  the  striking  consequences  of  the  war  has  nat- 
urally been  the  great  alteration  in  the  volume  and 
direction  of  Canadian  exports  and  imports.  In  the 
matter  of  exports  articles  which  scarcely  figured  in  the 
external  trade  of  the  country  rapidly  rose  within  the 
last  two  years  to  leading  places  on  the  list.  Thus  car- 
tridges and  shells  of  various  kinds,  which  in  the  three 
years  before  the  war  had  not  amounted  to  $10,000  a 
year,  in  the  first  ten  months  of  the  fiscal  year  1914-15 
were  exported  to  the  value  of  $188,000.  The  following 
year,  1915-16,  for  the  same  period  they  rose  to 
$37,800,000  and  in  1916-17  to  $185,329,000.2  The  ex- 
ports of  other  explosives  before  the  war  were  equally 
insignificant.  But  in  ten  months  of  1914-15  they 
amounted  to  $202,000,  the  ten  months  of  the  next  year 
to  $3,691,000  and  for  the  corresponding  ten  months 
ending  January,  1917,  to  $26,760,000.3  Steam  launches, 
which  even  in  the  first  two  years  of  the  war  amounted 
to  only  $6,000  and  $7,000  respectively,  suddenly  rose  in 
ten  months  of  1916-17  to  $15,147,000.  Carbide  rose 
from  $625,000  in  1914-15  to  $2,789,000  in  1915-16  and 
$3,743,000  in  the  ten  months  to  January,  1917.4  Sugar, 
which  was  exported  for  the  first  time  in  1915,  but 
only  to  the  extent  of  $31,000,  suddenly  rose  in  1916  to 
$3,393,000,  sent  to  Great  Britain.5 

1  Trade  and  Commerce  Report,  1916,  Part  I,  p.  721. 

*  Trade  and  Commerce  Monthly  Report,  Jan.,  1917,  p.  vii. 

*  Ibid. 

*  Ibid.  '  Ibid. 


26       EARLY  ECONOMIC  EFFECTS  OF 

Taking  the  exports  of  the  following  seven  articles, 
cartridges  and  shells,  copper  and  brass,  gasolene  launches, 
carbide,  sugar,  butter,  and  whiskey,  the  total  export  for 
the  ten-month  periods  to  January  in  each  year  amounted 
to  $8,519,000  in  1915,  $59,670,000  in  1916,  and  $262,- 
158,000  in  1917.  These  amounts  represent  the  following 
percentages  of  the  total  Canadian  exports  for  these 
periods:  in  1915,  2.5  per  cent;  1916,  10  per  cent;  1917, 
27.4  per  cent.1 

As  to  the  limited  field  in  which  Canadian  export  trade 
operates,  it  is  found  that  fifty  of  the  leading  articles  of 
export  amounted,  in  the  ten-month  periods  already 
referred  to,  to  the  following  percentages  of  the  total 
exports  of  the  country:  January,  1915,  84  per  cent; 
1916,  88  per  cent;  1917,  91  per  cent;  while  thirteen  of 
the  leading  articles  amounted  to  the  following  per- 
centages of  the  total  exports:  1915,  51  per  cent;  1916, 
59  per  cent;  1917,  71  per  cent.2 

As  to  the  general  direction  of  Canadian  trade,  it  is 
found  that  for  many  years  past  a  very  large  proportion 
of  Canadian  imports  and  exports  have  been  connected 
with  the  two  countries  Great  Britain  and  the  United 
States.  The  place  which  Canada  fills  in  United  States 
trade  is  shown  from  the  following  facts.  In  the  foreign 
trade  of  the  United  States,  Great  Britain  is  in  all 
respects  first.  As  regards  the  other  countries,  the 
imports  into  the  United  States  from  Canada  came  second 
to  Britain  in  1915,  third  in  1916,  Cuba  coming  second, 
while  Canada  was  second  again  in  1917.  As  regards 
exports  from  the  United  States  to  all  countries,  Canada 
came  second  to  Britain  in  1915,  third  in  1916,  and  third 
in  1917,  France  coming  second  in  those  two  years.3 

The  percentages  of  Canadian  trade  with  the  two 
countries  of  Great  Britain  and  the  United  States  taken 

1  Compiled  from  various  Trade  and  Commerce  Returns. 

2  Ibid. 

3  From  Tables  of  United  States  Returns  given  in  Canadian  Trade  and 
Commerce  Monthly  Report  for  Jan.,  1917,  p.  1122. 


THE  WAR  UPON  CANADA  27 

together  and  separately  are  set  forth  in  the  accompany- 
ing table.  These  percentages  cover  the  ten-month 
periods  ending  in  January  in  each  year. 

1915  1916  1917 

Percentages  of  Canadian  exports  to 

Great  Britain  and  the  United  States 88y3%  88%  89% 

Great   Britain    44  y2  60  6434 

The  United  States 44  28  24% 

Percentages  of  Canadian  imports  from 

Great  Britain  and  the  United  States 84%  87y2  91 

Great  Britain    20  15y2  13 

The  United  States 6434  72  73  « 

Taking  the  period  before  the  war  we  have  the  follow- 
ing corresponding  percentages  for  the  full  fiscal  years 
ending  with  the  dates  indicated: 

1912  1913  1914 

Percentages  of  Canadian  exports  to 

Great  Britain  and  the  United  States 93%  87%  87%% 

Great  Britain    51  473^  50 

The  United  States 42  39y4  37% 

Percentages  of  Canadian  imports  from 

Great  Britain  and  the  United  States 85  85  85 

Great  Britain    22  20  21 

The  United  States 63  65  64  ■ 

It  will  be  seen  from  these  figures  that  the  trade  of 
Canada  not  only  under  normal  conditions  but  even 
during  the  war  period  is  so  overwhelmingly  with  the 
two  countries  of  Great  Britain  and  the  United  States 
that  its  trade  with  the  rest  of  the  world  is  of  very 
secondary  interest  to  the  country  as  a  whole.  Conse- 
quently, the  almost  total  cessation  of  trade  with  certain 
countries,  particularly  those  of  the  enemy  and  those 
affected  by  the  war  zones,  makes  but  little  difference 
to  the  general  economic  condition  of  Canada,  however 
much  it  may  affect  a  few  special  interests  or  individuals. 
It  may  be  observed  that,  taken  as  a  whole,  the  proportion 
of  Canadian  exports  going  to  Great  Britain  and  the 
United  States  together,  has  varied  very  slightly  in  pass- 
ing from  the  prewar  to  the  war  period.  The  proportion 
of  the  joint  trade  has  slightly  increased  since  the  out- 
break of  the  war,  but  not  so  greatly  as  might  have  been 

*  Compiled  from  Returns  in  Monthly  Report  for  Jan.,  1917. 

'  Compiled  from  Returns  in  Trade  and  Commerce  Report,  1916,  Part  I. 


28       EARLY  ECONOMIC  EFFECTS  OF 

expected  when  we  consider  the  very  considerable  altera- 
tion in  the  demand  for  Canadian  raw  materials,  and 
especially  in  the  character  of  Canadian  manufactured 
exports.  When,  however,  we  come  to  survey  the  pro- 
portions in  which  this  fairly  uniform  joint  trade  is  made 
up  from  the  two  separate  countries,  we  find  that  while 
the  individual  proportions  are  fairly  uniform  for  the 
three  years  before  the  war,  there  is  a  very  great  change 
in  the  three  years  during  the  war.  Canadian  exports 
to  Great  Britain  are  normally  greater  than  those  to  the 
United  States,  nearly  in  the  proportion  of  five  to  four. 
During  the  first  year  of  the  war,  however,  they  were 
equally  divided  between  the  two  countries.  Then  the 
war  demands  from  Britain  greatly  increased,  but  this 
was  almost  exactly  offset  by  a  corresponding  decrease 
in  the  exports  to  the  United  States.  Thus,  while  the 
joint  proportion  remained  substantially  the  same,  the 
practical  equality  in  the  case  of  the  two  countries  which 
prevailed  during  the  first  year  of  the  war,  became  as 
two  to  one  in  favor  of  Britain  in  the  second  year,  and 
approximately  three  to  one  in  the  third  year  of  the  war. 
On  the  other  hand,  the  imports  from  Great  Britain, 
which  were  practically  one-third  those  from  the  United 
States  in  the  prewar  period,  became  steadily  less  during 
the  war  period,  being  somewhat  less  than  one-third  in 
the  first  year,  falling  to  practically  one-fifth  during  the 
second  year,  and  exactly  one-sixth  during  the  third  year. 
In  the  case  of  imports,  not  only  was  there  a  marked 
transference  of  the  source  of  supply  from  Great  Britain 
to  the  United  States,  but  the  United  States  absorbed 
also  most  of  the  reduced  trade  with  several  other  coun- 
tries. This  accounts  for  the  fact  that  the  total  import 
trade  with  Great  Britain  and  the  United  States  rose 
from  84%  per  cent  in  1915  through  87*^  per  cent  in 
1916  to  91  per  cent  in  1917.  Of  this  trade,  the  United 
States  obtained  no  less  than  78  per  cent.  The  normal 
percentage  of  imports  from  the  United  States  during  the 


THE  WAR  UPON  CANADA  29 

prewar  period  was  practically  64.  The  very  great  in- 
crease of  imports  from  the  United  States  during  the 
war  has  been  due  to  several  combined  conditions.  First, 
the  almost  complete  cessation  of  supplies  from  foreign 
countries,  particularly  those  of  the  enemy  and  those  in 
the  zone  of  war.  The  chief  cause  of  the  transference 
of  trade  from  Great  Britain  to  the  United  States  has 
been  partly  that  many  articles  hitherto  exported  were 
urgently  needed  in  Britain;  chiefly  because  of  the  in- 
creasing cost  of  ocean  freights  and  the  diminishing  ocean 
tonnage.  Lastly,  the  supplies  of  materials  and  equip- 
ment for  the  manufacture  of  munitions  in  Canada  were 
most  readily  obtained  from  the  United  States.  Thus 
if  we  take  some  typical  imports  for  the  ten-month 
periods  ending  in  January  of  each  year  we  find  such 
results  as  these  for  the  war  period: 

Imports  for  10  Months  1915  1916  1917 

Metals  and  minerals $71,500,000  $80,700,000  $133,100,000 

Articles  for  the  army  and  navy 600,000  27,000,000  115,900,000 

Chemicals,  drugs,  dyes,  etc 11,100,000  13,100,000  23,200,000 

Cotton,  and  manufacture  of 21,100,000  24,400,000  41,300,000 

Provisions 4,700,000  7,000,000  19,200,000* 

These  great  increases  in  the  total  amounts  were  almost 
entirely  from  the  United  States,  thus  materially  in- 
creasing the  proportion  obtained  from  that  country. 
Thus  $114,400,000  of  the  $115,900,000  of  the  articles 
for  the  army  and  navy  came  from  the  United  States. 
In  the  case  of  chemicals,  drugs  and  dyes,  the  proportion 
from  the  United  States  rose  from  sixty-two  in  1915  to 
seventy-six  in  1916  and  to  seventy-seven  in  1917.  In 
the  case  of  cottons  in  1915  the  percentage  obtained  from 
the  United  States  was  forty-seven,  while  in  1916  it  rose 
to  sixty-two,  and  in  the  following  year  to  sixty-three. 
In  the  case  of  provisions,  the  percentage  from  the 
United  States  rose  from  sixty- three  in  1915  to  ninety- 
three  in   1916   and  to  ninety-seven  in   1917.     Among 

1  Trade  and  Commerce  Monthly  Report  for  Jan.,  1917,  p.  vi. 


30  EARLY  ECONOMIC  EFFECTS  OF 

other  articles  in  which  there  was  considerable  increase 
in  imports  during  the  war,  the  greater  part  of  which 
came  from  the  United  States,  may  be  mentioned  beans, 
corn,  automobiles,  sugar,  silks,  furs,  woolens,  fancy 
articles,  fish,  hides  and  skins,  leather  and  manufactures, 
glass  and  manufactures,  paints  and  colors,  and  cocoa.1 
Of  the  trade  with  other  countries,  which  has  been 
greatly  altered,  that  with  the  enemy  powers,  it  goes 
without  saying,  has  been  almost  completely  suspended. 
This  trade  before  the  outbreak  of  the  war  was  chiefly 
with  Germany;  the  imports  from  that  country  amount- 
ing in  the  last  two  years  before  the  war  to  about 
$14,500,000  annually,  while  the  imports  from  Austria 
ran  from  $1,600,000  to  $2,600,000  in  the  same  years. 
There  was  also  about  $500,000  of  import  trade  from 
Turkey.  The  trade  with  the  other  Balkan  allies  of 
Germany  was  quite  insignificant.  The  exports  to 
Germany  ran  from  $3,000,000  to  $4,000,000  a  year  and 
to  Austria  and  Turkey  never  amounted  to  $500,000. 
The  total  trade  with  the  enemy  for  the  three  years 
before  the  war  was  as  follows: 

1912  1913  1914 

Total  imports  from  enemy  countries..  $13,151,000  $16,682,000  $17,803,000 
Total  exports  of  Canadian  products  to 

enemy  countries 3,659,000  3,228,000  4,881,000* 

It  will  be  recognized  that  the  total  cessation  of 
this  trade  was  not  of  much  consequence  to  Canada, 
especially  as  the  goods  involved  could  be,  as  a  rule, 
readily  obtained  elsewhere,  and  the  market  for  Canadian 
exports,  except  as  to  agricultural  implements,  has  been 
greatly  extended  elsewhere.  The  chief  lines  of  import 
from  the  enemy  countries  were  drugs  and  dyes  from 
Germany,  running  from  two-thirds  to  a  million  dollars, 
also  earthenware,  china,  machinery,  iron  and  steel  goods, 
settlers'  effects,  cotton  manufactures,  and  woolen  goods. 
In   the   matter    of   the    imports    of   textiles    generally, 

1  Compiled  from  various  sections  of  Trade  and  Commerce  Report,  1916. 

2  Trade  and  Commerce  Report,  1916,  Part  I,  pp.  40-43. 


THE  WAR  UPON  CANADA  31 

Germany  was  only  sixth  on  the  list,  coming  after  France, 
Switzerland,  and  India.  Other  articles  in  much  smaller 
quantities  were  sugar,  graniteware,  zinc,  spelter,  paints 
and  varnishes,  and  perfumery.  Austria  sent  much  the 
same  articles,  though  in  much  smaller  quantities,  with  the 
exception  of  silks.  The  Canadian  exports  to  Germany 
and  Austria  were  chiefly  wheat,  flour,  fish,  some  meats, 
and  agricultural  implements,  the  latter  furnishing  about 
one-fourth  of  the  total  export.1  As  already  indicated, 
no  great  disturbance  in  Canadian  trade  resulted  from 
the  breaking  of  trade  relations  with  the  enemy. 

In  the  case  of  the  other  countries  we  may  note,  first, 
the  changes  in  our  trade  relations  with  the  chief  Euro- 
pean Allies,  France,  Russia,  Italy,  and  Belgium.  In  the 
case  of  France  the  imports,  which  amounted  to  about 
$14,500,000  before  the  war,  fell  to  $8,250,000  in  1914-15, 
and  to  $5,700,000  in  the  first  full  year  of  the  war,2  but 
have  revived  to  the  amount  of  $5,981,000  for  the  eleven 
months  to  February,  1917.3  On  the  other  hand,  exports 
to  France,  which  had  been  running  from  $2,100,000  to 
$3,800,000  before  the  war,  suddenly  expanded  to  $14,- 
500,000  during  the  year  when  the  war  broke  out,  rising 
to  $36,000,000  for  the  first  full  year  of  the  war,  1915-16,4 
and  to  $57,000,000  for  the  eleven  months  to  February, 
1917.5  The  special  exports  to  France  consist,  in  the 
order  of  their  importance,  of  oats,  flour,  wheat,  hay, 
harness  and  saddlery,  beef  and  fish.6  Imports  from 
Russia  had  not  amounted  to  the  full  million  even  in 
the  best  year  before  the  war  and  fell  below  half  a 
million  in  1913-14  and  as  low  as  $103,000  in  1915  and 
$124,000  in  1916.  On  the  other  hand,  the  exports  to 
Russia,  which  before  the  war  consisted  almost  entirely 

1  Compiled  from  various  sections  of  the  Trade  and  Commerce  Report,  1916. 
'  Trade  and  Commerce  Report,  1916,  Part  I,  pp.  40-41. 

•  Trade  and  Commerce  Monthly  Report,  Feb.,  1917,  p.  1721. 
4  Trade  and  Commerce  Report,  1916,  Part  I,  pp.  40-41. 

•  Trade  and  Commerce  Monthly  Report,  Feb.,  1917,  p.  1721. 

•  Trade  and  Commerce  Report,  1916.    Various  sections. 


32  EFFECTS  OF  THE  WAR  UPON  CANADA 

of  agricultural  implements,  expanded  considerably  after 
the  outbreak  of  the  war.  Large  quantities  of  railroad 
equipment ,  as  also  considerable  harness  and  saddlery 
during  the  first  year  of  the  war  were  sent  to  Russia. 
Thus  the  exports  which  before  the  war  had  not  risen 
above  $2,100,000  expanded  to  $6,000,000  in  1915  and  to 
$7,000,000  in  1916.1 

Imports  from  Italy  had  risen  to  $2,100,000  in  1913-14, 
but  fell  off  the  following  year  to  $1,500,000  and  to 
$966,000  for  1915-16.  They  revived,  however,  to  over 
$1,000,000  during  the  eleven  months  to  February,  1917. 
On  the  other  hand,  the  exports  to  Italy,  which  had  not 
exceeded  $655,000  before  the  war,  increased  to  $4,800,000 
in  1915-16,2  this  being  part  of  the  wheat  commandeered 
by  the  Canadian  government  in  the  autumn  of  1915. 
Belgian  trade  has  practically  vanished  since  the  outbreak 
of  the  war  except  for  goods  sent  on  charitable  account, 
especially  in  the  first  year  of  the  war. 

1  Trade  and  Commerce  Report,  1916.     Various  sections. 
3  Ibid.,  Part  I,  pp.  42-43. 


THE  EARLY  EFFECTS  OF  THE  EUROPEAN 

WAR  UPON  THE  FINANCE,  COMMERCE, 

AND  INDUSTRY  OF  CHILE 


EDITOR'S    PREFACE 

This  study  of  the  first  effects  of  the  European  War 
on  Chile  was  made  by  Dr.  L.  S.  Rowe,  of  the  University 
of  Pennsylvania,  who  spent  two  months  in  the  country 
for  the  purpose.  Dr.  Rowe  needs  no  introduction.  He 
is  well  known  in  both  North  and  South  America  and  has 
been  long  recognized  as  an  authority  on  Pan  American 
relations  and  policy.  His  knowledge  of  the  people  and 
the  language  of  Chile  makes  it  peculiarly  fitting  for  him 
to  prepare  such  a  report. 

Dr.  Rowe's  study  shows  that  trade,  transportation, 
labor  conditions,  and  finance  in  Chile  all  suffered.  As 
Dr.  Rowe  remarks,  "  The  widespread  suffering  caused 
throughout  Chile  by  reason  of  the  European  conflict  is 
but  another  indication  of  how  deeply  the  vital  interests 
of  the  republics  of  America  have  been  affected.  Not 
only  were  government  finances  seriously  impaired  but 
almost  every  branch  of  industrial  life  suffered  a  severe 
shock." 

While  it  is  true  that  the  European  War  at  its  out- 
break produced  serious  effects  on  the  economic  life  of 
Chile,  as,  indeed,  of  other  South  American  countries, 
some  of  the  evil  results  were  soon  overcome.  Moreover, 
some  of  the  immediate  effects  of  the  war  were  good 
rather  than  bad.  In  all  cases  we  find  reported,  at  first, 
stoppage  of  industry,  trade  and  commerce,  and  dis- 
organization of  finance  and  labor.  But  readjustment 
soon  took  place,  in  some  cases  on  a  healthier  basis.  Bad 
credit  practices  have  been  destroyed;  desirable  retrench- 
ment in  public  expenditures  has  been  in  some  cases 
enforced.  Trade  losses  in  one  direction  have  been  made 
up  in  many  instances  by  gains  in  other  directions;  and, 

35 


36  EDITOR'S  PREFACE 

in  some  cases  perhaps,  more  natural  routes  and  relations 
have  been  established.  Some  of  these  advantages  will 
undoubtedly  be  lasting. 

Very  likely  some  of  the  main  currents  of  trade  will 
be  permanently  altered  and  domestic  industry  will  un- 
doubtedly be  stimulated.  In  so  far  as  this  stimulation 
leads  to  greater  use  at  home  of  the  immense  natural 
resources  of  South  American  countries  it  will  be  a  benefit 
to  their  people  as  well  as  to  the  rest  of  the  world. 

'  It  is  believed  that  this  study,  in  spite  of  the  fact  that 
it  was  written  two  and  one-half  years  ago,  will  be  of 
interest  in  connection  with  that  by  Senor  Vildesola  on 
Chile  and  the  European  War,  published  by  the  Endow- 
ment in  its  Division  of  Intercourse  and  Education.  The 
reader  must  remember  that  it  was  written  soon  after  the 
outbreak  of  the  European  War  and  that  the  figures  are 
those  of  that  period.  It  is  believed,  however,  that  the 
material  will  be  of  value  as  indicating  the  immediate 
effect  at  the  outbreak  of  the  war  on  the  commerce, 
finances,  and  industries  of  Chile. 

David  Kinley, 

Editor. 


FOREWORD 

The  material  contained  in  this  report  was  collated  dur- 
ing the  course  of  a  visit  to  Chile  in  the  summer  of  1915. 
The  purpose  of  the  Carnegie  Endowment  was  to  secure  a 
series  of  studies  setting  forth  the  effect  of  the  European 
War  on  certain  of  the  countries  of  South  America.  It  is 
important  in  reading  this  report  to  bear  in  mind  that  its 
purpose  is  to  explain  the  immediate  effects  of  the  out- 
break of  the  European  War  on  the  finances,  commerce 
and  industry  of  Chile.  The  report  was  submitted  to  the 
Endowment  late  in  1915.  The  period  that  has  elapsed 
since  its  preparation  has  witnessed  marked  changes  in  the 
financial  and  industrial  situation  of  Chile.  The  rapid  rise 
in  the  price  of  nitrate  and  copper  has  brought  these  indus- 
tries to  the  highest  level  of  prosperity.  The  situation  in 
1918  is  in  marked  contrast  with  that  which  prevailed  im- 
mediately after  the  outbreak  of  the  war. 

L.  S.  Rowe. 

University  of  Pennsylvania, 

February,  1918. 


CONTENTS 

CHAPTER  PAGE 

I.    The  Economic  and  Physical  Background    39 

A.  The  Nitrate  and  Mineral  Region 

of  the  North 41 

B.  The  Agricultural  Central  District  43 

C.  The  Southern  District  ....  46 
II.    The  Industrial,  Commercial,  and  Finan- 
cial Situation  Immediately  Preceding 
the  War 47 

III.  Effect  of  the  War  on  National  Finances    49 

IV.  Effect   of   the  War   on   Currency   and 

Banking 56 

V.    Effect  of  the  War  on  Commerce  and  In- 
dustry    63 

The  Copper  Industry 66 

Agriculture 67 

Domestic  and  International  Trade   .  67 
Emergency  Measures  Adopted  to  En- 
able Merchants  to  Meet  Conditions 

Created  by  the  War 70 

Transportation  Facilities  as  Affected 

by  the  War 72 

Labor  Conditions  as  Affected  by  the 

War 75 

Conclusion 85 

Appendices 87 


THE  EARLY  EFFECTS  OF  THE  EUROPEAN 

WAR  UPON  THE  FINANCE,  COMMERCE, 

AND  INDUSTRY  OF  CHILE 


CHAPTER  I 

THE  ECONOMIC  AND  PHYSICAL 
BACKGROUND 

The  economic  and  financial  condition  of  Chile  before 
and  after  the  outbreak  of  the  European  War  can  best 
be  understood  by  keeping  constantly  in  mind  the  peculiar 
conditions  of  physical  environment  which  have  given  to 
the  country  an  exceptional  position  amongst  the  South 
American  republics. 

In  physical  conformation,  Chile  is  a  long,  narrow- 
country  stretching  from  latitude  17°  15'  south  to  55°  59' 
south,  a  distance  of  2,535  miles.  Compared  with  its 
enormous  coast  line,  the  country  is  exceedingly  narrow, 
ranging  from  a  width  of  102  miles  (latitude  31°  30)  to 
210  miles  (latitude  46°  30).  The  population  is  massed 
in  the  central  district,  the  far  southern  section  being 
practically  uninhabited  and  the  population  of  the  arid 
northern  district  being  limited  to  the  mining  population 
of  the  nitrate,  copper,  iron,  and  borax  fields.  Inasmuch 
as  there  is  little  immigration  into  Chile,  the  increase 
of  population  is  due  almost  entirely  to  the  excess  of 
births  over  deaths.  It  is  true  that  the  nitrate  fields 
of  the  North  attract  a  certain  number  of  Bolivian 
laborers,  but  their  number  remains  fairly  constant, 
diminishing  somewhat  in  periods  of  depression  and 
increasing  in  periods  of  prosperity. 


40  THE  EARLY  EFFECTS  OF 

The  growth  of  population  in  Chile  has  been  as  follows: 


1835 1,010,332 

1843 1,083,801 

1854 1,439,120 

1865 1,819,223 

1875 2,075,971 


1885 2,527,300 

1895 2,712,145 

1907 3,249,279 

1913 3,551,703 

1914 3,596,541 


The  distribution  of  population  among  the  twenty-four 
provinces  of  the  Republic  is  as  follows : 


as 

5f  q>  3 

Provinces              g  0  '•§ 

P  1 

<  a. 

, 1007 

Tacna    23,958  28,748 

Tarapacd     46,957  110,036 

Antofagasta   ...120,718  113,323 

Atacama    79,585  63,968 

Coquimbo    34,862  175,021 

Aconcagua    14,210  128,486 

Valparaiso    5,059  281,385 

Santiago    14,672  516,870 

O'Higgins   6,066  92,339 

Colchagua     9,948  159,030 

Curic6    7,714  107,095 

Talca    9,948  131,957 

Linares 10,210  109,363 

Maule     6,410  110,316 

Nuble 8,823  166,245 

Conception   8,422  216,994 

Arauco    6,366  61,538 

Bfobfo 13,587  97,968 

Malleco    7,701  109,775 

Cautfn 16\105  139,553 

Valdivia    21,637  118,277 

Llanquihue   91,676  105,043 

Chiloe     22,255  88,619 

Magallanes  ....171,438  17,330 

757,366  3,249,279 


ox 
«°  3 


1.2 

2.3 

0.9 

0.8 

5.0 

9.0 

55.6 

35.2 

15.2 

15.9 

13.8 

13.2 

10.7 

17.2 

18.8 

25.8 

9.6 

7.2 

14.2 

9.2 

5.5 

1.1 

4.0 

0.1 


- 


44,291 
119,714 
122,354 

65,875 
181,242 
135,558 
311,809 
566,787 

95,524 
159,676 
108,791 
133,235 
113,365 
119,107 
172,244 
230,442 

62,732 
102,170 
115,177 
166,895 
141,298 
118,973 

93,684 

24,374 


I! 

11 


-1912- 


1.8 

2.5 

1.0 

0.8 

5.2 

9.5 

61.6 

38.6 

15.7 

16.0 

14.1 

13.4 

11.1 

18.6 

19.5 

27.4 

9.8 

7.5 

14.9 

11.0 

6.5 

1.3 

4.2 

0.1 


15,543 

9,678 

9,031 

1,907 

6,221 

7,072 

30,424 

49,917 

3,185 

646 

1,696 

1,278 

4,002 

8,791 

5,999 

13,448 

1,194 

4,202 

5,402 

27,342 

23,021 

13,930 

5,065 

7,044 


&•£ 


w  ft. 


70.2 

16.2 

14.8 

5.8 

6.9 

10.4 

19.5 

17.6 

6.7 

0.8 

3.1 

1.9 

7.1 

14.8 

7.0 

11.7 

3.8 

8.2 

9.4 

32.8 

32.6 

23.4 

10.8 

57.8 


4.3  3,505,317 


4.6   256,038    14.6 


The  laboring  population  of  Chile  is,  in  the  main,  a 
mixture  of  Spanish  and  Indian  blood,  whereas  the  ruling 
classes  are  white,  of  pure  Spanish  descent. 

For  purposes  of  study,  the  country  may  best  be  divided 
into  three  zones: 


THE  EUROPEAN  WAR  UPON  CHILE  41 

(a)  The  nitrate  and  mineral  region  of  the  North. 

(b)  The  agricultural  central  district,  which  also 
contains  important  mineral  deposits. 

(c)  The  vast  southern  region  stretching  southward 
from  the  Island  of  Chiloe  to  the  Magellan  dis- 
trict which  is,  as  yet,  practically  uninhabited  and 
whose  resources  are  almost  untouched. 

A.    The  Nitrate  and  Mineral  Region  of  the  North 

The  salitre  of  Chile  or  Chilean  saltpeter  (chemically, 
sodium  nitrate  [Na  N03])  is  found  in  the  district  from 
the  Camerones  River  in  the  North  to  Caldera  in  the 
South.1  The  nitrate  area  is,  roughly  speaking,  about 
450  miles  in  length,  in  an  arid  region.  The  deposits  are 
found  at  from  fourteen  to  twenty  miles  from  the  coast 
at  elevations  varying  from  2,200  to  7,500  feet  above  sea- 
level.2 

The  importance  of  nitrate  as  a  national  product  is 
readily  seen  from  the  fact  that  it  represents  nearly  eighty 
per  cent  in  value  of  the  total  exports  of  Chile. 

The  growth  of  nitrate  production  has  been  as  follows: 

Amount  in 
Year  Metric  Tons 

1879 59,344 

1889 951,372 

1899 1,389,822 

1900 2,110,961 

1910 2,465,415 

1911 2,521,023 

1913 2,585,850 

1914 2,463,356 

In  1913  the  nitrate  output  represented  about  eighty 
per  cent  of  the  total  mineral  product  of  the  country. 
Although  nitrate  is  by  far  the  most  important  product 
of   this    northern    district,    other    mineral    products    of 

1  See  South  America  as  an  Export  Field,  by  Otto  Wilson,  U.  S.  Bureau  of 
Foreign  and  Domestic  Commerce,  1914. 

'  See  Strauss,  The  Chilean  Nitrate  Industry,  Mining  and  Scientific  Press, 
San  Francisco,  Cal.,  1914. 


42  THE  EARLY  EFFECTS  OF 

importance  are  found  in  the  same  region.  Of  these 
copper  ranks  first.  Iron  and  borax  are  found  also 
in  considerable  quantities.  It  is  to  be  noted,  how- 
ever, that  these  minerals  are  found  not  only  in  the 
northern  section  but  in  the  central  agricultural  districts 
as  well.  Inasmuch  as  the  most  important  nitrate  fields 
did  not  come  under  Chilean  jurisdiction  until  after  the 
Peruvian  War  of  1879,  as  a  result  of  the  annexation 
of  the  Peruvian  provinces  of  Tarapaca  and  Atacama  and 
of  the  Bolivian  province  of  Antofagasta,  the  preponder- 
ant position  of  nitrate  is  a  matter  of  the  last  thirty 
years. 

The  most  accurate  estimate1  indicates  that  during  the 
century  1810-1910  the  total  production  of  minerals  in 
Chile  was  $2,463,500,000.  This  total  was  made  up  as 
follows : 

Nitrate    $1,235,300,000 

Copper    664,292,000 

Silver     298,695,000 

Coal    114,516,000 

Gold   68,084,000 

Other  Minerals    82,613,000 

The  latest  available  official  statistics  indicate  the 
mineral  production  in  1913  and  1914  as  follows: 

Product  1913  1914 

Nitrate  of  soda $119,554,485  $106,232,227 

Copper    11,389,315  11,790,522 

Coal     9,144,580  8,152,095 

Borax    2,636,835  1,675,117 

Iodine   1,925,400  2,154,444 

Silver    523,875  448,757 

Chalk    313,710                       

Sulphur    299,115  450,360 

Gold    286,680  208,320 

Salt   256,695  325,562 

Iron  Ore   105,750  476,292 

Lime      69,040  x  304,127 

Lead    2,370  2,063 

Zinc  405  65 


Total    $146,508,255  $132,219,921 

See  Wilson,  op.  cit.,  p.  110. 
1  Including  figures  for  chalk. 


THE  EUROPEAN  WAR  UPON  CHILE  43 


B.    The  Agricultural  Central  District 

While  the  peculiar  physical  conformation  of  Chile 
means  a  relatively  restricted  arable  area,  the  importance 
of  the  agricultural  interests  is  such  as  to  give  to  Chile 
the  character  of  an  agricultural  country.  In  fact,  prior 
to  the  annexation  of  the  northern  provinces  in  1883,  this 
was  practically  the  exclusive  interest  of  the  country. 
In  spite  of  this  fact,  but  1.6  per  cent  of  the  total  area 
of  the  country  is  under  cultivation,  3,047,000  acres  out 
of  a  total  of  187,148,000.1  It  is  true  that  this  area  can 
be  greatly  extended,  but  in  the  north  central  section  such 
extension  involves  the  construction  of  extensive  irrigation 
works.  At  present  about  2,470,000  acres  are  under 
irrigation,  but  it  is  estimated  that  the  irrigation  system 
can  readily  be  extended  to  nearly  five  million  additional 
acres.  A  law  passed  December  9,  1914,  authorizes  the 
execution  of  four  plans  known  as  the  Aconcagua,  Maule, 
Melado,  and  Laja  projects.  The  assent  of  the  property 
owners  affected  has  been  received,  but  the  financial  crisis 
precipitated  by  the  European  War  has  temporarily  post- 
poned the  execution  of  the  plan.  In  the  south  central 
district,  where  the  rainfall  is  adequate  at  all  seasons,  the 
greatest  obstacle  to  more  extended  cultivation  has  been 
the  absence  of  immigration.  The  Chilean  agricultural 
laborer  has,  for  generations,  been  kept  in  a  condition  of 
economic  dependence.  In  addition  to  housing  and  a 
small  ration  of  from  one  to  two  and  one-fifth  pounds 
of  beans  per  day,  his  money  wage  ranges  from  twenty 
to  forty  cents  per  day.  The  depreciating  paper  cur- 
rency of  the  country  has  served  to  make  his  lot  more 
and  more  difficult.  With  a  relatively  low  wage  scale,  the 
agricultural  laborer  is  not  in  a  position  to  become  a 
small  farmer.  In  fact,  with  the  exception  of  relatively 
restricted  sections  in  the  provinces  of  Valdivia  and  Con- 

1  Wilson,  op.  cit.,  p.  114. 


44  THE  EARLY  EFFECTS  OF 

cepcion,   the   system   of   large    landed   estates    prevails. 
These  conditions  have  discouraged  immigration. 

In  this  section  all  the  cereals  and  fruits  of  the  temperate 
zone  are  cultivated,  as  well  as  some  of  the  sub-tropical 
fruits,  such  as  the  orange  and  the  lemon.  Cattle  raising 
is  also  an  important  factor  in  the  wealth  of  the  region. 
The  growing  of  grapes  for  the  making  of  wine  has  been 
for  many  years  one  of  the  leading  industries  of  the 
central  district.  A  little  over  140,000  acres  are  now  in 
vineyards.    In  1912  the  leading  crops  were  as  follows: 

Metric  Tons 
Cereals  and  Vegetables  1912 

Wheat    615,023 

Barley   70,786 

Oats   49,065 

Corn     38,774 

Potatoes    262,795 

Beans    45,000 

Carrots    12,700 

Alfalfa   hay    262,795 

Clover  hay   10,050 

Tobacco     2,303 

Clover  seed    720 

Hemp  fibre    272 

In  addition  to  the  above  products,  it  is  essential 
to  mention  the  lumber  industry,  which  is  yet  in  its 
infancy  in  Chile  but  which  promises  to  assume  great 
importance  owing  to  the  large  quantities  of  excellent 
timber  to  be  found  in  the  provinces  of  Valdivia,  Llan- 
quihue,  and  on  the  Island  of  Chiloe.  Furthermore, 
during  the  last  twenty-five  years  apiculture  has  assumed 
large  proportions.  In  1912  there  were  86,000  beehives 
in  Chile,  with  a  total  production  of  731  tons  of  honey 
and  157  tons  of  wax.1  Dairy  products  are  also  a 
significant  factor.  In  1912  there  were  195,167  milch 
cows  in  Chile,  with  a  total  production  of  33,300,000 
gallons  of  milk,  1,336  metric  tons  of  butter,  and  3,493 
metric  tons  of  cheese. 

It  is  also  in  this  central  district  that  manufacturing 
has  assumed  considerable  importance.     In  fact,  almost 

1  See  Wilson,  op.  cit.,  p.  117. 


THE  EUROPEAN  WAR  UPON  CHILE 


45 


every  foreign  visitor  expresses  surprise  that  the  indus- 
tries of  the  country  have  not  been  developed  on  a  far 
larger  scale.  With  ample  water  power,  and  no  lack 
of  coal,  iron,  and  lumber,  one  would  expect  Chile 
to  be  the  leading  manufacturing  country  of  South 
America.  Although  there  has  been  considerable  de- 
velopment of  national  industries  the  great  obstacles 
have  been  the  lack  of  capital  and  the  absence  of 
an  adequate  supply  of  skilled  labor.  With  practically 
no  immigration  from  Europe,  little  attempt  has  been 
made  to  develop  the  industrial  capacity  of  the  native 
laborer. 

In  spite  of  these  difficulties  the  industrial  development 
of  the  country  has  proceeded  without  interruption  during 
the  last  twenty-five  years.  In  1912  the  number  of  manu- 
facturing establishments,  together  with  capital  and  out- 
put, was  as  follows:1 

Number  of 

Establish-  Value  of 

Industry  ments  Capital  Output 

Flour   mills    179  $12,193,434  $14,536,219 

Breweries    63  ,5,334,031  3,249,423 

Tanneries     129  5,116,415  4,936,200 

Establishments    for   the   elaboration    of 

wood  products  other  than  sawmills..  134  4,827,576  5,044,088 

Sawmills    296  2,931,287  1,701,626 

Sugar   refineries    8  4,327,917  4,933,736 

Printing  and  binding  establishments...  302  4,369,780  6,025,810 

Shoe  factories    45  3,498,020  4,394,493 

Glass  factories  3  583,176  457,995 

Spaghetti  factories  40  892,497  783,176 

Cracker  factories    12  379,145  645,057 

Fruit  and  vegetable  canneries 23  1,495,839  603,975 

Meat  and  sea   food   packing  establish- 
ments      6  158,000  175,090 

Shipbuilding  and  repair 32  929,257  556,518 

Hat  factories   11  1,090,942  829,132 

Corset  factories  5  273,906  364,210 

Cement  factories  3  726,333  450,500 

Textile  factories   18  2,409,427  2,097,426 

Agricultural    and    industrial    machine 

shops     2  763,333  633,333 

Bed  and  cot  factories 4  192,652  607,574 

Powder  factories  9  191,072  138,447 

Soap  and  candle   factories 66  1.738,732  2,047,497 

Total   1,390  $54,422,771  $55,211,525 

1  See  Sinopsis  Estadistica  de  la  Republica  de  Chile.  Oficina  Central  de 
Estadfstica,  1914. 


46  EFFECTS  OF  WAR  UPON  CHILE 

While  some  manufacturing  is  carried  on  in  all  parts 
of  the  country  the  great  centers  of  industrial  activity  are 
the  provinces  of  Santiago,  Valparaiso,  and  Valdivia. 
The  labor  supply  is  almost  exclusively  native.  The  rate 
of  wages  is  exceedingly  low  and  the  position  of  the  labor 
classes  has  been  unfavorably  affected  by  the  depreciating 
paper  currency.  For  instance,  in  the  textile  industry 
the  average  wage  of  the  2,766  operatives  is  fifty-five 
cents  per  day.1  The  government  has  made  every  effort 
to  encourage  national  industries,  extending  protective 
tariffs  and,  in  some  cases,  offering  further  special  finan- 
cial inducements. 

The  central  district,  now  under  consideration,  in 
addition  to  its  agricultural  and  industrial  position, 
also  possesses  important  mineral  deposits.  One  of  the 
greatest  copper  mines  of  Chile  is  situated  in  the  heart 
of  this  region. 

C.    The  Southern  District 

With  the  exception  of  the  agricultural  and  lumber 
interests  on  the  Island  of  Chiloe  and  the  great  sheep 
ranges  of  the  Magellan  territory  the  resources  of  the 
far  southern  district  may  be  said  to  be  untouched.  At 
present  the  population  of  the  Island  of  Chiloe  is  94,714 
and  of  the  entire  Magellan  territory  22,744.  Although 
this  district  is  acquiring  increasing  importance,  it  repre- 
sents at  the  present  time  but  a  small  part  of  the  total 
production  of  the  country.  To  develop  its  resources 
large  investments  of  capital  will  be  necessary. 

1  Wilson,  op.  cit.,  p.  119.  This  was  true  in  1915.  Since  then  the  wages 
of  industrial  laborers  have  increased  considerably. 


CHAPTER  II 

THE  INDUSTRIAL,  COMMERCIAL,  AND  FI- 
NANCIAL SITUATION  IMMEDIATELY 
PRECEDING  THE  WAR 

Although  Chile,  like  all  the  countries  of  South 
America,  felt  the  effects  of  the  industrial  and  financial 
depression  which  hung  over  Europe  during  the  year 
1913,  they  were  less  noticeable  than  in  the  Argentine 
and  in  Brazil.  This  was  due,  in  large  measure,  to 
the  fact  that  the  spirit  of  speculation  which  led  to 
inflated  values  in  both  of  those  countries  during  the 
period  of  1910  to  1913  did  not  extend  to  Chile.  There 
the  leading  influence  during  the  period  immediately 
preceding  the  war  was  the  declining  price  of  nitrate — 
at  once  the  most  important  article  of  export  (eighty  per 
cent  of  the  total  exports)  and  the  most  important  source 
of  national  revenue.1 

Although  the  production  of  nitrate  had  not  been 
curtailed,  profits  were  rapidly  declining  and  plans  were 
formulated  to  reorganize,  under  government  auspices, 
the  combination  of  nitrate  producers  which  had  been 
operated  successfully  for  a  number  of  years  but  which 
was  finally  dissolved  because  of  lack  of  cooperation. 

The  condition  of  the  nitrate  industry  reacted  unfav- 
orably on  the  general  economic  and  financial  condition 
of  the  country.  The  year  1913  was  marked  by  a 
restriction  of  bank  credits  which  accentuated  the  business 
depression.  Between  June  30,  1913,  and  June  30,  1914, 
bank  loans  declined  from  $115,085,956  to  $111,967,636 

1  The  nitrate  export  tax  yields  thirty-five  per  cent  of  total  national  revenues. 

47 


48  EFFECTS  OF  WAR  UPON  CHILE 

(American  gold).     During  this  same  period  bank  de- 
posits declined  from  $91,240,000  to  $87,300,000. 

In  spite  of  these  unfavorable  conditions  the  country 
cannot  be  said  to  have  been  in  a  period  of  pronounced 
depression  as  was  the  case  in  Argentine  and  in  Brazil 
in  1912  and  1913.  It  is  true  that  but  few  new  enter- 
prises were  being  floated,  banks  were  exercising  greater 
care  in  extending  credits,  and  merchants  were  showing 
greater  caution  and  conservatism  in  their  purchases. 
Everybody  was  awaiting  an  improvement  in  nitrate 
prices,  which  alone  would  have  been  sufficient  to  place 
the  country  on  the  high  road  to  prosperity.  Further- 
more, there  were  indications  of  an  improvement  in  the 
price  of  copper,  the  low  price  of  which  had  been  for  a 
long  time  an  unfavorable  factor  in  the  Chilean  industrial 
situation. 

At  this  moment  of  expectancy,  the  European  War 
came  as  a  crushing  blow,  bringing  with  it  a  series  of 
consequences  which  seriously  embarrassed  the  national 
treasury  and  threatened  ruin  and  disaster  to  the  indus- 
tries of  the  country. 


CHAPTER  III 

EFFECT  OF  THE  WAR  ON  NATIONAL 
FINANCES 

In  order  to  understand  the  unfortunate  effects  of  the 
war  on  Chilean  finances,  it  is  important  to  bear  in  mind 
the  extraordinary  and  exceptional  fiscal  system  of  the 
country.  Prior  to  the  war  of  1879  with  Peru  and 
Bolivia,  the  Chilean  fiscal  system  was  similar  in  most 
respects  to  those  of  the  other  South  American  countries. 
In  addition  to  the  customs  revenues,  the  main  sources  of 
income  to  the  national  treasury  were  a  general  property 
tax  and  certain  internal  revenue  taxes.  As  a  result  of 
this  war,  Chile  took  from  Bolivia  the  province  of  Anto- 
fagasta  and  from  Peru  the  provinces  of  Atacama  and 
Tarapaca,  leaving  pending  for  subsequent  determination 
the  status  of  Tacna-Arica. 

The  annexation  of  these  great  nitrate  provinces  com- 
pletely changed  the  fiscal  system  of  the  country.  Pos- 
sessing a  practical  monopoly  of  the  nitrate  deposits  of 
the  world,  the  government  was  able  to  impose  a  high 
export  tax  without  danger  of  hampering  the  development 
of  the  industry.  This  tax  proved  so  productive  that  it 
was  possible  either  to  dispense  with  other  forms  of 
taxation  or  reduce  the  rates  to  so  low  a  point  as  to 
relieve  the  property  owners  of  the  greater  part  of  their 
burden.  From  a  country  with  a  normal  fiscal  system, 
Chile  was  soon  transformed  into  a  country  occupying 
the  exceptional  position  of  granting  to  its  inhabitants 

49 


50  THE  EARLY  EFFECTS  OF 

practical  immunity  from  general  taxes  on  real  and  per- 
sonal property. 

While  at  first  glance  this  may  seem  an  advantage,  it 
involved  some  serious  dangers,  the  effects  of  which  soon 
became  apparent.  The  enormous  and  constantly  in- 
creasing returns  from  the  nitrate  export  tax  and  the 
consequent  diminution  of  all  direct  taxes,  relieved  the 
government  of  that  control  by  public  opinion  which  is 
the  immediate  and  direct  result  of  the  taxpayers'  vigi- 
lance. The  annual  budget  increased  rapidly,  due  to  a 
wide  extension  of  government  activities.  The  govern- 
ment embarked  upon  an  elaborate  system  of  state  rail- 
roads, which,  whatever  their  immediate  strategic  value  or 
ultimate  commercial  importance,  involved  the  necessity 
of  meeting  a  large  annual  deficit. 

This  situation,  while  profundly  affecting  the  or- 
ganization of  the  Chilean  administrative  system,  did 
not  involve  any  financial  difficulties  so  long  as  the 
growing  nitrate  industry  assured  a  constantly  increasing 
national  revenue.  With  no  elastic  internal  revenue 
system  to  fall  back  upon,  it  was  evident  to  the  lead- 
ing financiers  of  the  country  that  any  serious  decline 
in  the  returns  from  the  nitrate  tax  would  mean  disaster 
to  the  national  treasury.  The  years  1911,  1912,  and 
1913  brought  a  foretaste  of  what  was  impending.  The 
heavy  drain  on  the  financial  resources  of  the  country, 
due  to  the  unusually  large  deficits  in  the  state  railway 
budget,  resulted  in  deficits  which  in  1912  amounted  to 
$4,700,000  American  gold  and  in  1913  to  $2,000,000. 
It  was  claimed,  however,  that  this  deficit  was  temporary; 
the  state  railway  administration  holding  out  the  constant 
hope  that  the  new  lines  soon  would  be  put  on  a  paying 
basis. 

With  the  outbreak  of  the  war  the  most  important 
source  of  national  revenue  practically  disappeared.  The 
average  monthly  production  from  January  1  to  August 
1,  1914,  was  5,404,729  quintals  of  101.4  pounds.     The 


THE  EUROPEAN  WAR  UPON  CHILE  51 

rapid  decline  in  production  is  seen  from  the  following 
table:1 

Production 
Month  (in  quintals  of  101.4  lbs.) 

August,   1914    4,830,233 

September,  1914    2,856,600 

October,  1914   2,865,494 

November,  1914  2,659,875 

December,  1914   2,428,759 

January,  1915    2,082,549 

The  price  of  nitrate  dropped  from  eight  shillings  per 
quintal  in  July,  1914,  to  six  shillings  four  pence  in 
September,  and  soon  thereafter  to  five  shillings  eight 
pence.  Although  these  prices  were  quoted,  there  was 
practically  no  market.  Contemporaneous  with  the  rapid 
decline  in  price  and  adding  still  further  to  the  difficulties 
of  the  situation  came  an  extraordinary  rise  in  freight 
rates  which  made  exportation  practically  impossible. 
The  sudden  change  that  took  place  is  made  clear  in  the 
following  table: 

Exportation  Exportation 

Jan.  to  July,  incl.  August  to  Dec,  incl. 

Quintals  (101. 4  lbs.) 

1913  30,481,463        29,047,647 

1914  30,538,756         9,608,707 

The  decline  in  national  revenues  from  this  source  alone 
has  been  as  follows: 

REVENUE  FROM  NITRATE  EXPORT  TAX 

Dollars  American  Gold 

1913     32,446,303 

1914     23,369,471 

Another  element  in  the  financial  situation  which  served 
to  place  the  public  treasury  in  a  difficult  position  was 
the  rapid  decline  in  customs  revenues.  With  the  out- 
break of  the  European  War  the  import  trade  of  Chile 
came  to  a  standstill.  This  was  due  in  part  to  the 
temporary  paralyzation  of  steamship  communication, 
although  the  permanent  underlying  cause  was  the  cut- 
ting off  of  European  credits  and  the  inability  of  local 

1  Commerce  Reports,  March  29,  1915. 


52  THE  EARLY  EFFECTS  OF 

merchants  to  meet  the  new  trade  conditions  created  by 
the  war.  The  ♦Chilean  merchants  were  accustomed  to 
a  system  of  long  term  credits,  and  the  sudden  change 
to  the  requirements  of  cash  transactions  crippled  the 
purchasing  power  of  most  of  the  commercial  houses. 

It  is  not  surprising,  therefore,  to  find  that  the  customs 
receipts  for  1914  were  $7,138,558  less  than  those  of 
1913,  i.e.,  $16,417,136  as  compared  with  $23,555,694. 
That  this  decline  continued  during  the  year  1915  is 
shown  by  the  fact  that  whereas  the  customs  receipts 
during  the  first  three  months  of  1913  (January  to  March 
inclusive)  were  $5,039,123  the  receipts  during  the  same 
period  of  1915  were  less  than  half  this  amount, 
$2,353,658. 

Confronted  with  the  prospect  of  inability  to  meet  the 
ordinary  requirements  of  the  public  administration,  the 
government  was  compelled  to  have  recourse  to  a  series 
of  emergency  measures  of  which  the  most  important 
were  as  follows:1 

1.  Law  of  March  1,  1915,  reducing  by  from  five  to 
fifteen  per  cent  salaries  of  officials  of  the  national  gov- 
ernment as  well  as  all  pensions. 

2.  Law  of  March  1,  1915,  imposing  the  following 
export  tax  on  borax : 

(a)  During  the  first  two  years  after  enactment  of 
the  law  $2.50  American  gold  per  metric  ton. 

(b)  Thereafter  $3.65  per  metric  ton. 

3.  Law  of  February  5,  1915,  establishing  an  in- 
heritance tax: 

(a)  Of  from  one  to  four  per  cent  on  bequests  to 
lineal  heirs. 

(b)  Of  five  per  cent  on  all  collateral  inheritances. 

(c)  Of  ten  per  cent  on  bequests  to  persons  bearing 
no  blood  relation  to  the  testator. 

All  bequests  to  the  Church  are  exempt  from  this  tax. 

1  The  further  emergency  measures  intended  to  help  the  banking  situation 
and  to  assist  the  nitrate  industry  will  be  discussed  in  a  subsequent  section. 


THE  EUROPEAN  WAR  UPON  CHILE  53 

4.  Law  of  March  1,  1915,  establishing  a  national 
general  property  tax  of  from  two  to  four  mills.  Here- 
tofore the  general  property  tax  has  been  exclusively 
municipal  and  the  new  national  tax  is  based  entirely 
on  the  municipal  tax,  being  collected  as  a  surtax  on 
the  assessments  made  for  municipal  taxation.  The  law 
provides  that  the  national  tax  shall  be  two  mills  on  real 
estate  in  Santiago,  Valparaiso,  Vina  del  Mar,  and  all 
other  cities  in  which  a  special  local  paving  and  drainage 
tax  exists,  and  four  mills  on  real  estate  in  all  other  sec- 
tions of  the  Republic.  The  national  rate  on  personal 
property  is  fixed  at  four  mills  in  all  parts  of  the 
country. 

While  these  additional  taxes  will  add  considerably  to 
the  national  revenues,  it  is  not  likely  that  they  will  be 
sufficient  to  balance  the  budget.  Fortunately,  the  last 
few  months1  have  witnessed  a  notable  revival  of  the 
nitrate  industry.  The  large  demand  of  the  powder 
manufacturers  has  advanced  the  price  to  a  point  higher 
than  before  the  outbreak  of  the  war.  Exportation  has 
again  assumed  normal  proportions  and  there  is  every 
indication  that  it  will  soon  exceed  the  normal.  The 
result  is  that  the  revenue  from  the  export  tax  will  be 
considerably  larger  than  was  estimated  in  the  budget. 
The  indications  are  therefore  that  the  deficit  for  the 
year  1915  which  seemed  inevitable  at  the  opening  of  the 
year  will  either  disappear  or  will  be  greatly  reduced. 
It  probably  will  be  necessary  to  fund  the  standing  defi- 
cits of  the  preceding  years  by  means  of  a  loan,  although 
the  government  fully  realizes  that  owing  to  the  high 
prevailing  rates  of  interest  the  conditions  are  unfavorable 
to  any  funding  operations. 

The  national  debt  is  classified  into  two  distinct  cate- 
gories, the  "  external  "  and  the  "  internal  "  debt.  The 
"external"  debt  is  as  follows: 

1  This  was  written  in  1915. 


54  THE  EARLY  EFFECTS  OF 

Rate  of       Sinking  Original 

Year      interest  fund  Name  of  loan  amount 

Per  cent      Per  cent  , Pound 

1885  4%  y2      Chilean  Government  4% 

per  cent  loans  of  1885. .      808,900 

1886  4%  %       Chilean  Government  4% 

per  cent  loans  of  1886. .  6,010.000 

1887  4%  %      Chilean  Government  4% 

per  cent  loan  of  1887..  1,160,200 
1889        4%  %       Chilean  Government  4% 

per   cent   gold    loan    of 

1889  1,546,400 

1892        5  y2      Chilean     Government     5 

per  cent  loan  of  1892..  1,800,000 

1892  6  1  Chilean     Government     6 

per     cent     international 

loan  of  1892 149,000 

1893  4%  y2      Chilean  Government  4% 

per  cent  bonds  of  1893. .      630,000 

1895  4>y2  %      Chilean  Government  4% 

per  cent  loans  of  1895 . .  2,000,000 

1896  5  y2      Chilean  Government  4% 

per  cent  loans  of  1896..  4,000,000 

1896        5y2  2  Penuelas  loan 200,000 

1900  4%  %  Chilean  Government  4y2 
per  cent  Coquimbo  Rail- 
way bonds 265,000 

1905  5  1  Chilean     Government     5 

per  cent  loan  of  1905..  1,350,000 

1906  4%  2  Chilean   Government  4y2 

per   cent    gold    loan    of 

1906  3,700,000 

1909  5  %      Chilean     Government     5 

per  cent  loan  of  1909 . .  3,000,000 

1910  5  1  Chilean     Government     5 

per  cent  loan  of  1910. .  2,600,000 

1911  5  1  Chilean     Government     5 

per  cent   loan   of   1911, 

first  series  4,905,000 

1911        5  1  Chilean     Government     5 

per   cent   loan   of   1911, 

second  series    5,000,000 

1911        4%  1%       Chilean  Government  4% 

per  cent  bonds  (Copiapo 

Railway  bonds)    275,000 

Total    external    debt    of 
Chilean  Government  ...39,399,500 

To  the  above  there  should  be  added  2,000,000  pounds 
sterling  of  treasury  notes  floated  in  London.  In  ad- 
dition, the  government  has  guaranteed  the  following: 

(a)  A  loan  of  the  Iron  Smelting  Co.  of  Corral,  for 
525,000  pounds  sterling. 

(b)  The  bonds  issued  by  the  Transandine  Railway 
Co.  amounting  to  1,450,000  pounds  sterling. 


Amount 
outstanding 
Sterling . 

Issue 
price 

531,100 

89 

4,206,700 

98y2 

817,500 

9iy2 

1,223,640 

101% 

1,447,300 

95 

90,520 

495,700 

1,661,300 

9sya 

3,436,700 
74,400 

95% 

222,160 

1,256,700 

95% 

2,981,220 

94^ 

2,934,700 

96% 

2,517,040 

99 

4,802,180 

98% 

4,948,200 

98% 

265,280 

33,912,340 

THE  EUROPEAN  WAR  UPON  CHILE  55 

(c)  The  bonds  issued  by  the  Longitudinal  Railway- 
Contracting  Co.  amounting  to  about  7,000,000 
pounds  sterling. 

The  so-called  "internal"  debt  is  made  up  as  follows: 

Gold  Pesos  of  18d. 

1.  Obligations   incurred   in   Treaty   of   Peace  with 

Bolivia     5,822,535.00 

Paper  Pesos 

2.  Municipal  indebtedness  assumed  by  the  national 

government •    9,232.28 

3.  Censos  Redimidos    30,450,431.46 

4.  Internal  loan  of  1837  (3%) 1,594,772.06 

5.  Paper  money   (against  which  a  conversion  fund 

is  deposited  in  Europe) 150,000,000.00 

6.  Early  issues  of  paper  money 863,803.00 

1  The  total  "  external "  indebtedness  of  Chilean  municipalities  amounts  to 
£800,000. 


CHAPTER  IV 

EFFECT  OF  THE  WAR  ON  CURRENCY  AND 

BANKING 

This  subject  is  so  closely  related  to  the  question  of 
government  finances  that  the  discussion  of  the  one 
necessarily  involves  the  other.  The  Chilean  currency 
system  is  based  on  the  gold  peso,  whose  nominal  value 
is  18  pence  or  36.5  cents  American  gold.  Until  1898 
the  convertibility  of  the  peso  was  maintained;  but  since 
that  time  a  system  of  inconvertible  paper  money  with  a 
fluctuating  value  has  prevailed.  The  extent  of  these 
fluctuations  has  been  as  follows: 

VALUE  OF  CHILEAN  GOLD  PESO  IN  ENGLISH  PENCE 
(Nominal  Value  18d.) 
Average  value  in  Average  value  in 

English  Pence  English  Pence 

1899 143£  1906 14% 

1900 16%  .         1907 12% 

1901 15%  1908 9% 

1902 15%6  1909 1025^2 

1903 165/8  1910 102%2 

1904 16%  1911 10% 

1905 15%  1912 10% 

During  the  last  two  years  the  fluctuations  have  been 
as  follows: 

VALUE  OF  CHILEAN  PAPER  PESO  IN  ENGLISH  PENCE 

1913  1914 

d.  d. 

January 10%2  8% 

February 1°%6  91%2 

March.. 10%2  9% 

April 10%2  92%2 

May 9%  9%6 

June 92%2  ^tte 

July 9%6  9% 

August 91Me  9We 

September 9%6  82%2 

October 91%2  7% 

November 9  %2  ?  %6 

December 91%2  7%6 

Average  for  year 9%  83i^2 

56 


EFFECTS  OF  WAR  UPON  CHILE  57 

This  constantly  fluctuating  currency  has  been  a  serious 
obstacle  to  the  development  of  Chilean  commerce  as 
well  as  a  constant  discouragement  to  the  investment  of 
foreign  capital.  The  uncertainties  of  the  situation,  the 
constant  danger  of  finding  profits  swept  away  by  reason 
of  falling  exchange  have  not  only  been  a  handicap  to 
commercial  transactions  but  have  introduced  an  element 
of  speculation  into  international  trade  which  has  been 
harmful  to  the  country.  Commission  houses  in  Chile 
in  order  to  protect  themselves  against  losses  due  to  fluc- 
tuations in  exchange  are  compelled  to  go  into  the  market 
and  purchase  Chilean  exchange  to  the  amount  of  their 
sales  for  delivery  ninety  days  from  date,  i.e.  when  pay- 
ment for  the  goods  they  have  sold  becomes  due. 

During  the  last  fifteen  years  the  leading  problem  con- 
fronting the  Chilean  government  has  been  the  reestablish- 
ment  of  the  convertibility  of  the  paper  peso.  A  "  con- 
version fund,"  which  today  amounts  to  $38,495,390  in 
American  gold,  has  been  maintained  in  Europe.  In- 
numerable projects  have  received  the  consideration  of 
the  government,  but  there  has  always  been  an  influential 
element — the  large  landowners — who  while  publicly  fav- 
oring a  conversion  plan  are  in  reality  in  favor  of  main- 
taining the  present  system,  which  permits  them,  for  all 
exported  products,  to  receive  payment  in  gold,  while  they 
are  paying  their  laborers  in  a  depreciated  paper  currency. 
During  the  last  ten  years,  however,  the  laboring  classes 
have  been  acquiring  some  little  influence  in  public  affairs. 
They  have  seen  with  increasing  clearness  that  they  are 
the  main  sufferers  by  reason  of  a  depreciating  currency 
— their  money  wages  remaining  practically  the  same, 
while  the  purchasing  power  is  constantly  declining. 

After  a  long  series  of  discouraging  postponements,  a 
plan  was  finally  evolved  by  which  the  convertibility  of 
the  paper  peso  was  to  be  reestablished  in  1915.  This 
plan  provided  for  the  establishment  of  an  institution  to 
be  known  as  the  "  Caja  de  Conversion  "  to  be  managed 


58  THE  EARLY  EFFECTS  OF 

by  a  board  of  six  directors  to  be  appointed  by  the 
President  of  the  Republic,  two  to  be  approved  by  the 
Senate  and  two  by  the  Chamber  of  Deputies.  Under 
the  plan  as  approved  by  the  Senate,  the  conversion  was 
to  be  made  on  the  basis  of  twelve  pence  gold  to  the 
peso  and  a  fixed  rate  of  exchange  to  be  maintained  at 
that  point  thereafter.  In  the  Chamber  of  Deputies  this 
rate  was  reduced  to  ten  pence. 

In  spite  of  this  deadlock,  the  conditions  seemed  favor- 
able to  the  carrying  out  of  some  definite  plan  in  1915. 
The  financial  crisis  precipitated  by  the  European  War 
put  an  immediate  end  to  all  thought  of  an  early  solution 
of  the  problem.  Congress  immediately  postponed  until 
1917  the  date  at  which  the  convertibility  of  paper  money 
should  be  established.  Unless  financial  conditions  both 
in  Chile  and  in  the  world  at  large  improve  considerably 
during  the  coming  year  it  is  likely  that  Chile  will  be 
compelled  to  postpone  for  a  further  period  the  reform  for 
which  her  merchants  have  been  waiting  so  long — the 
establishment  of  a  stable  currency  system. 

In  spite  of  the  fact  that  the  "  Conversion  Fund " 
amounts  to  more  than  twelve  pence  per  peso  in  circu- 
lation, the  effect  of  the  war  was  to  cause  a  rapid  decline 
of  exchange  to  less  than  eight  pence.  Although  it  has 
recovered  somewhat,  the  prevailing  rate  during  the  first 
six  months  of  1915  was  less  than  nine  pence.  This  has 
been  due  in  part  to  the  unfavorable  trade  balance  and 
in  part  to  the  speculative  manipulation  of  exchange. 
The  amount  of  paper  currency  in  circulation  at  the  end 
of  1913  was  150,863,803.50  pesos. 

In  Chile,  as  in  all  the  other  countries  of  South  America, 
the  outbreak  of  the  war  led  to  a  financial  panic  which 
caused  heavy  withdrawals  of  bank  deposits.  In  order 
to  avert  disaster  the  first  step  taken  by  the  banks  was 
to  avail  themselves  of  the  provisions  of  the  law  of  May 
11,  1912,  which  created  a  "  Central  Office  of  Issue  "  and 
authorized  the  banks  to  receive  paper  money  in  exchange 


THE  EUROPEAN  WAR  UPON  CHILE  59 

for  gold  deposited  at  the  rate  of  one  peso  paper  for 
every  twelve  pence.  The  extent  to  which  use  was  made 
of  this  emergency  circulation  is  evidenced  by  the  fact 
that  on  August  3,  1914,  at  the  height  of  the  financial 
stress,  33,000,000  pesos  were  issued  to  three  local  banks 
in  Santiago.  Of  the  total  emission  of  55,481,590  pesos 
issued  under  this  law  a  considerable  portion  had  been 
retired,  so  that  on  July  31,  1915,  but  25,820,000  pesos 
remained  in  circulation. 

As  a  further  measure  to  relieve  the  strain  caused  by 
the  European  War  on  the  country's  banking  system,  the 
Congress  passed  a  law  (August  3,  1914)  providing  for 
the  issuance  of  treasury  notes  by  the  government.  The 
legislation  relating  to  this  subject  was  intended  not  only 
to  relieve  the  banking  situation,  but  also  to  assist  the 
nitrate  producers,  the  hope  of  the  government  being  that 
by  coming  to  their  aid,  it  would  be  possible  to  induce 
them  to  continue  operations  and  thus  prevent  the  com- 
plete paralyzation  of  the  industry  and  the  widespread 
misery  which  would  be  entailed  in  throwing  out  of 
employment  sixty  or  seventy  thousand  men. 

The  emergency  laws  relating  to  this  subject  were 
passed  on  August  3  and  August  12,  1914,  and  are 
known  as  laws  Nos.  2912  and  2918.  The  first  relates 
to  treasury  notes  issued  to  the  banks  and  authorizes 
the  President  of  the  Republic  to  issue  for  a  period  of 
one  year  treasury  notes  of  denominations  of  five 
thousand,  one  thousand,  and  five  hundred  pesos  Chilean 
currency.  These  notes  are  not  to  bear  interest  but 
are  legal  tender  for  all  obligations  payable  in  paper 
currency.  Under  the  provisions  of  the  law  banks 
may  secure  these  treasury  notes  under  the  following 
conditions: 

First.  Banks  desiring  these  notes  may  secure  them  by 
depositing  with  the  government  mortgage  "  cedulas,"  a 
form  of  bond  issued  by  the  agricultural  credit  institutions. 


60  THE  EARLY  EFFECTS  OF 

Notes  to  the  extent  of  ninety  per  cent  of  the  market  value 
of  such  "  cedulas  "  will  be  issued. 

Second.  For  the  use  of  these  notes  the  banks  are  re- 
quired to  pay  to  the  government  a  rate  of  interest  three 
per  cent  less  than  the  interest  charged  by  such  banks  to 
their  debtors. 

The  possibility  of  increasing  their  reserves  through 
these  treasury  notes  contributed  materially  toward  en- 
abling the  banks  to  tide  over  the  crisis  caused  by  the 
withdrawal  of  funds  by  depositors.  From  August  12, 
1914,  to  July  31,  1915,  the  government  issued  to  the 
banks  treasury  notes  to  the  amount  of  38,554,500  pesos. 
Of  this  total  the  banks  have  returned  for  cancellation 
33,100,000  pesos,  leaving  a  balance  of  5,454,500  pesos 
outstanding. 

Notes  of  a  similar  character  were  issued  to  producers 
of  nitrate.  The  conditions  of  this  issue  will  be  described 
in  considering  the  effect  of  the  European  War  on  com- 
merce and  industry  in  Chile.  Suffice  it  to  say  in  this 
connection  that  under  authority  conferred  by  the  law  of 
August  12,  1914,  the  government  has  issued  to  pro- 
ducers of  nitrate  treasury  notes  amounting  to  39*300,500 
pesos.  Of  this  total  32,085,000  pesos  have  been  returned 
for  cancellation,  leaving  a  balance  of  7,215,500  pesos. 
Thus  the  total  of  treasury  notes  still  in  circulation  on 
July  31,  1915,  amounted  to  12,670,000  pesos. 

The  effect  of  the  European  War  on  the  banking 
situation  in  Chile  as  compared  with  that  produced  in  the 
other  countries  of  South  America  leads  one  to  the  con- 
clusion that,  relatively  speaking,  the  Chilean  banks  suf- 
fered but  little.  The  fact  that  the  country's  currency  is 
on  a  paper  basis  served  to  lessen  the  shock.  With- 
drawals of  gold  by  foreign  banks  were  met  by  the 
emergency  issues  described  above.  The  paper  currency 
enabled  the  banks  to  meet  the  threatened  contraction 
with  comparative  ease.     But  one  institution,  the  Banco 


THE  EUROPEAN  WAR  UPON  CHILE  61 

Italiano,  was  compelled  to  close  its  doors  and  the  general 
opinion  prevailing  in  financial  circles  is  that  the  failure 
was  not  due  primarily  to  the  war. 

The  most  serious  aspect  of  the  banking  situation 
was  the  effect  on  the  relations  existing  between  the 
banks  and  the  general  public.  Commerce  and  industry 
suffered  severely  from  the  sudden  restriction  of  credits. 
While  the  banks  took  this  step  as  a  measure  of  self- 
protection,  the  immediate  effect  was  to  bring  about  the 
paralyzation  of  trade.  Since  the  beginning  of  1915  there 
has  been  a  marked  tendency  toward  a  more  liberal  policy 
in  the  extension  of  bank  credits.  The  improvement  of 
the  nitrate  situation  has  had  a  buoyant  effect  on  the 
banks  and  has  led  them  to  grant  facilities  which  they 
consistently  refused  during  the  latter  half  of  1914.  The 
extent  to  which  credit  restriction  was  carried  can  be  seen 
from  a  comparison  of  the  bank  statements  for  1913  and 
1914  respectively: 

CHILEAN  BANKS 

1913  1914 

Paper  Pesos  Gold  Pesos  18d.  Paper  Pesos   Gold  Pesos  18d. 

Deposits    316,055,823.55  33,041,352.93  313,138,171.18      40,341,725 

Capital     142,271,047.00  502,000.00  188,477,340.00        2,121,035 

Cash     51,595,617.35  6,759,589.00  76,831,730.00        5,997,985 

Discounts,  loans  and 

advances    453,318,217.00  25,494,440.00  418,613,893.00      16,715,293 

FOREIGN  BANKS 

1913  1914 

Paper  Pesos  Gold  Pesos  18d.  Paper  Pesos  Gold  Pesos  18d. 

Deposits   94,604,919  28,060,408  78,415,724  28,327,621 

Capital    16,639,207  8,267,973  27,632,312  3,267,973 

Cash     14,853,229  2,004,020  30,011,968  2,222,068 

Discounts,  loans  and 

advances     137,797,622  31,220,208  93,898,825  32,519,997 

From  the  foregoing  table  it  will  be  seen  that  the 
foreign  banks  restricted  their  credits  to  a  far  greater 
extent  than  the  Chilean  banks.  This  was  a  source  of 
widespread  complaint  and  led  to  a  marked  feeling  of 
opposition  toward  the  foreign  institutions.     In  fact,  one 


62  EFFECTS  OF  WAR  UPON  CHILE 

of  the  immediate  results  has  been  to  give  renewed  force 
to  the  agitation  for  legislation  requiring  banks  to  invest 
or  maintain  in  the  country  the  capital  they  declare  for 
use  in  Chile  and  also  limiting  their  deposits  in  proportion 
to  their  declared  local  capital. 

Although  it  cannot  be  said  that  the  banking  situation 
has  again  reached  normal  conditions,  the  danger  point 
has  been  passed  and  with  each  month  the  leading  banks 
are  strengthening  their  position  through  increasing  gold 
reserves  and  at  the  same  time  extending  their  usefulness 
to  the  community  through  a  more  liberal  credit  policy. 
As  regards  the  currency  situation,  there  is  noticeable 
a  slight  tendency  toward  the  improvement  of  exchange. 


CHAPTER  V 

EFFECT  OF  THE  WAR  ON  COMMERCE 
AND  INDUSTRY 

Although  the  effects  of  the  general  world-wide 
depression  were  felt  in  Chile  throughout  the  year  1913 
and  during  the  six  months  of  1914  immediately  pre- 
ceding the  outbreak  of  the  European  War,  the  acuteness 
of  the  depression  was  not  so  marked  as  in  the  other 
leading  countries  of  South  America,  notably  the  Argen- 
tine, Brazil,  and  Peru.  The  main  reason  for  the  more 
favorable  situation  of  Chile  has  been  referred  to  in  a 
preceding  section,  viz.:  the  local  situation  was  not  ag- 
gravated by  a  reaction  against  a  long  period  of  specu- 
lative inflation,  such  as  characterized  Argentine  and 
Brazilian  commercial  conditions  during  the  years  1910 
to  1913,  inclusive.  While  it  is  true  that  world  conditions 
were  not  favorable  either  to  the  nitrate  or  to  the  copper 
market — the  two  great  products  of  Chile — the  depression 
was  not  sufficient  to  lead  to  any  serious  curtailment  of 
production.  In  fact,  during  the  months  of  May,  June, 
and  July,  1914,  there  were  marked  indications  of  a 
healthy  renewal  of  business.  It  was  generally  expected 
that  the  year  would  end  with  a  record  of  real  improve- 
ment over  1913. 

The  war  came  as  a  blight  to  all  these  prospects.  The 
fact  that  Chile  is  essentially  a  "  one-product  country " 
and  that  not  only  the  general  prosperity  of  the  country 
but  also  the  stability  of  government  finances  are  de- 
pendent on  the  conditions  of  the  nitrate  market,  means 
that  any  influence  that  seriously  affects  the  demand  for 
nitrate  immediately  reacts  throughout  the  entire  country. 
The  European  War,  at  one  blow,  practically  destroyed 

63 


64  THE  EARLY  EFFECTS  OF 

the  nitrate  market,  for  the  time  being.  Up  to  the  out- 
break of  the  war  Europe  was  the  great  market  for  this 
product,  as  will  be  seen  by  examining  the  export  figures 
for  1913  and  1914. 

EXPORT  OF  NITRATE 

(Metric  Tons) 

1913  1914 

Great  Britain    1,004,979  607,022 

Germany     629,298  303,334 

France   121,472  67,128 

Belgium    118,690  74,082 

Netherlands    100,379  77,314 

Italy    10,684  18,231 

United  States   630,790  536,799 

Other  Countries   122,731  162,873 

Total   2,739,023  1,846,783 

The  uncertainties  of  transportation  due  to  the  presence 
of  belligerent  fleets  in  the  Pacific  completely  paralyzed 
shipping  and  thus  made  it  impossible  to  meet  even  the 
reduced  demands  of  Europe.  The  importance  of  nitrate 
as  a  factor  in  the  international  trade  of  Chile  is  seen  from 
the  fact  that  in  1913  it  represented  $111,454,397  out  of 
a  total  export  of  $142,801,576. 

The  misery  entailed  on  the  laboring  classes  will  be 
discussed  in  a  subsequent  section.  As  regards  the  nitrate 
producers  they  found  themselves  facing  a  situation  which 
threatened  ruin.  During  the  first  six  months  of  1914 
the  production  of  nitrate  was  32,148,999  quintals  of  101.4 
pounds  as  compared  with  30,092,777  quintals  during  the 
first  six  months  of  1913.  Exportation  during  the  first 
six  months  of  1914  was  24,144,211  quintals  as  compared 
with  26,922,030  for  the  same  period  of  1913.  The  fol- 
lowing comparison  of  production  and  exportation  illus- 
trates the  situation  immediately  preceding  and  immedi- 
ately following  the  outbreak  of  the  European  War. 

Jan.-July  Aug.-Dec. 

(inclusive)  (inclusive) 

Quintals  Quintals 

Production  of  nitrate  (1913) 35,388,811  37,862,106 

Production  of  nitrate  (1914) 39,963,956  15,689,115 

Exportation  of  nitrate  (1913) 30,481,463  29,047,647 

Exportation  of  nitrate  (1914) 30,538,756  9,608,707 


THE  EUROPEAN  WAR  UPON  CHILE  65 

Not  only  did  prices  drop  violently  but  for  a  time 
there  was  practically  no  market  at  any  price.  By  Feb- 
ruary, 1915,  the  price  had  declined  to  five  shillings  eight 
pence  per  quintal  and  the  number  of  plants  in  operation 
was  reduced  from  134  to  43.  The  general  closing 
down  of  the  nitrate  plants  threatened  jto  create  a  critical 
labor  situation.  In  normal  times  about  53,000  laborers 
are  employed  in  this  industry,  earning  on  an  average 
6.48  Chilean  paper  pesos  per  day,  which  at  the  then 
rate  of  exchange  is  equivalent  to  $1.02  American  gold. 
The  arid  character  of  the  nitrate  district  makes  it  im- 
possible to  transfer  this  labor  to  other  employment  in 
the  same  region  during  periods  of  depression.  Further- 
more, the  laborer  in  the  nitrate  fields  is  accustomed  to 
a  higher  standard  of  life  than  the  agricultural  laborers 
of  the  South. 

As  soon  as  the  nitrate  plants  began  to  close  down  the 
government  addressed  itself  to  the  problem  of  transport- 
ing the  laborers  to  the  agricultural  provinces.  Thirty 
thousand  were  thus  transferred.  We  shall  have  occasion 
to  refer  to  the  results  of  this  transfer  in  considering  the 
labor  situation  created  by  the  European  War.  Refer- 
ence is  made  to  the  matter  in  this  connection  in  order 
to  explain  the  motives  that  led  the  government  to  come 
to  the  rescue  of  the  nitrate  industry  through  special 
legislation  intended  to  encourage  the  continued  operation 
of  the  plants. 

On  August  2,  1914,  the  Congress  passed  a  law  author- 
izing the  President  of  the  Republic  to  advance  to  such 
nitrate  producers  as  agreed  to  continue  the  operation  of 
their  plants  the  sum  of  three  Chilean  pesos  (at  the  then 
rate  of  exchange  49  cents)  per  Spanish  quintal  of  nitrate 
in  stock  at  the  plant  or  four  pesos  for  each  quintal 
deposited  at  any  of  the  ports  of  the  Republic.  The 
original  act  provided  that  no  such  advances  were  to  be 
made  after  December  31,  1914,  but  a  subsequent  law 


66  THE  EARLY  EFFECTS  OF 

(that  of  January  4,  1915)  extended  the  period  for  a 
further  six  months. 

Up  to  January  31,  1915,  sixty-seven  nitrate  producers 
had  availed  themselves  of  the  privilege  accorded  by  the 
law,  receiving  advances  amounting  to  37,713,455.00  paper 
pesos.  Of  this  total  9,813,544.77  have  been  repaid  to 
the  government,  leaving  a  balance  of  27,899,910.23  pesos 
outstanding. 

Since  the  first  of  February,  1915,  the  nitrate  situation 
has  been  gradually  improving.  During  the  months  of 
May,  June,  and  July,  1915,  the  improvement  has  been 
so  rapid  that  at  the  present  moment  (September, 
1915)  the  industry  has  almost  reached  a  normal  level. 
In  fact,  the  only  obstacle  to  complete  restoration  has 
been  the  absence  of  an  adequate  labor  supply.  With 
the  return  of  the  laboring  population  that  was  trans- 
ported to  the  southern  provinces  at  the  outbreak  of  the 
war,  all  the  plants  will  be  placed  in  full  operation.  The 
main  reason  for  this  rapid  improvement  has  been  the 
advancing  demand  for  nitrate  by  the  powder  factories 
of  the  United  States.  With  this  increasing  demand 
prices  have  advanced  steadily.  Instead  of  being  unsal- 
able at  five  shillings  eight  pence  per  quintal,  as  was  the 
case  soon  after  the  outbreak  of  the  war,  the  quotations 
in  September  reached  and  passed  the  eight  shilling  mark. 
The  price  range  during  the  last  two  years  has  been  as 
follows : 

RANGE  OF  PRICE  PER  QUINTAL 

August,  1913 7s.  9^d.  to  8s.            ($1.89  to  $1.94) 

September,  1913   8s.  "7s.  lid.  (  1.94  "     1.92) 

August,  1914 7s.  %d.  "6s.  lOd.  (  1.71  "     1.66) 

September,  1914 6s.  (  1.46  ) 

October,  1914   6s.  (  1.46  ) 

July,  1915    7s.  7d.  (  1.84  ) 

August,  1915 8s.  (  1.94  ) 

The   Copper   Industry 

The  effect  of  the  European  War  on  the  copper 
industry  in  Chile  has  been  practically  the  same  as  in 


THE  EUROPEAN  WAR  UPON  CHILE  67 

Peru.  Unsatisfactory  conditions  prevailed  in  the  copper 
market  since  1910.  Prices  steadily  declined  from  eleven 
cents  in  1910  to  ten  cents  in  1914.  With  the  outbreak 
of  the  war  the  industry  suffered  temporarily  because  of 
a  lack  of  shipping  facilities,  but  the  increasing  demand 
for  copper  for  the  manufacture  of  war  materials  led  to 
a  steady  advance  in  price.  Although  freight  rates  have 
risen,  the  increase  has  not  been  sufficient  to  discourage 
the  development  of  the  industry.  The  two  great  plants, 
"El  Teniente  "  and  "El  Chiqucamata,"  are  now  work- 
ing to  their  full  present  capacity  and  this  is  also  true  of 
the  smaller  enterprises.  The  value  of  the  exports  of 
copper  in  1914  as  compared  with  1913  is  as  follows: 

1913  1914 

Copper  bars   $5,593,540  $7,135,015 

Copper  concentrates 2,432,942  1,867,214 

Copper  ore   2,310,869  1,912,313 

These  figures  give  but  an  inadequate  idea  of  the  extent 
of  the  revival  of  the  copper  industry,  as  the  effect  of  the 
increasing  world  demand  for  copper  did  not  make  itself 
felt  until  well  toward  the  end  of  1914. 

Agriculture 

Inasmuch  as  Chile  is  not  an  exporter  of  agricultural 
products  to  any  considerable  extent,  the  European  War 
cannot  be  said  to  have  had  a  marked  effect  on  the 
agricultural  situation.  The  temporary  closing  of  the 
nitrate  fields  during  the  latter  half  of  1914  deprived 
the  farmers  of  the  South  of  an  important  market  for 
their  products,  but  this  was  merely  a  temporary  setback 
from  which  full  recovery  has  been  effected. 

Domestic  and  International  Trade 

With  the  exception  of  the  laborers  in  the  nitrate 
fields,  no  class  of  Chilean  society  has  suffered  so  severely 
from  the  effects  of  the  war  as  the  wholesale  and  retail, 


63  THE  EARLY  EFFECTS  OF 

merchants.  From  whatever  point  of  view  we  approach 
the  situation,  it  is  evident  that  all  the  influences  set  in 
operation  by  the  European  War  tended  to  make  their 
position  increasingly  difficult.  The  restriction  of  credits 
by  the  banks  made  it  impossible  to  secure  the  customary 
accommodations,  falling  exchange  served  further  to  re- 
duce the  little  credit  that  remained  in  the  foreign  market, 
and  the  widespread  unemployment  amongst  the  laboring 
classes  led  to  a  serious  decline  in  the  amount  of  business 
transacted. 

The  restriction  of  European  sources  of  supply  for 
manufactured  goods  led  the  merchants  of  the  country 
to  look  to  the  United  States  as  a  possible  source  of 
supply,  but  here  they  were  confronted  by  the  refusal 
of  American  manufacturers  to  grant  the  long  term 
credits  to  which  the  Chilean  merchants  had  been  ac- 
customed and  without  which  they  were  unable  to  make 
any  large  purchases. 

In  the  discussion  of  the  effects  of  the  European  War 
on  the  nitrate  industry  we  have  incidentally  referred  to 
the  temporary  paralyzation  of  the  export  trade  in  this, 
the  most  important  of  Chilean  products.  Although 
nitrate  suffered  more  severely  than  other  articles  of 
export  a  comparison  between  the  figures  of  1913  and 
1914  indicates  a  general  falling  off,  with  the  exception 
of  copper  bars  and  barley. 

VALUE  OF  EXPORTS  OF  CHILEAN  PRODUCTS,  1913-1914 

1913  1914 

Nitrate    $111,454,397  $77,117,063 

Copper  bars   5,593,540  7,135,015 

Copper  ore    9,310,869  1,912,313 

Copper  concentrates  2,432,942  1,867,214 

Wheat  2,390,727  199,775 

Hides    1,537,850  918,260 

Barley     303,361  1,677,078 

Quillay  bark  90,639  132,857 

The  total  value  of  exports  sent  to  the  various  countries 
during  the  years  1913  and  1914  was  as  follows: 


THE  EUROPEAN  WAR  UPON  CHILE  69 

DISTRIBUTION  OF  EXPORTS,  1913-1914 

1913  1914 

Great   Britain    $55,548,341  $40,041,306 

United   States    30,413,385  31,437,890 

Germany    30,772,742  18,078,985 

France    8,847,885  4,245,128 

Belgium    5,673,769  3,444,558 

Holland    4,470,103  3,290,995 

Argentine 1,034,880  1,511,508 

These  figures  indicate  a  marked  falling  off  in  the 
exports  to  all  countries  with  the  exception  of  the  United 
States  and  the  Argentine.  As  regards  the  former,  it  is 
explained  by  the  recovery  of  the  copper  and  nitrate 
shipments  toward  the  end  of  1914.  In  the  case  of  the 
Argentine  the  increase  is  due  to  the  demand  for  dried 
fruits  and  vegetables. 

The  European  War  has  had  a  disastrous  effect  on  the 
import  trade,  due,  in  part,  to  the  crippling  of  shipping 
facilities  from  Europe,  but  mainly  to  the  shutting  off 
of  European  credits  and  the  inability  of  the  Chilean 
merchants  to  establish  such  credits  in  the  United  States. 

In  1913  the  total  imports  were  $120,254,731.  They 
declined  to  $108,461,095  in  1914.  Imports  from  the 
United  States  held  their  own,  whereas  those  from  Eu- 
rope suffered  a  severe  decline.  The  increase  of  imports 
from  Australia  and  Peru  were  due  to  heavy  shipments 
of  coal  and  sugar  respectively. 


CHILEAN  IMPORTS,  1913-1914 

1913  1914 

Germany    $29,598,138  $25,889,770 

Great  Britain  35,928,943  22,309,086 

United  States  20,089,158  20,148,575 

France    6,623,260  4,106,107 

Belgium    5,673,426  4,151,372 

Argentine    3,262,653  2,164,935 

India     3,187,043  1,979,472 

Italy    3,176,284  1,976,512 

Peru    4,810,475  5,380,220 

Australia    3,343,831  6,270,379 ' 

1  For  many  of  the  figures  relating  to  exports  and  imports  the  writer  desires 
to  acknowledge  his  indebtedness  to  the  Hon.  L.  J.  Keena,  American  Consul 
General  at  Valparaiso. 


.70  THE  EARLY  EFFECTS  OF 

The  violent  fluctuations  of  Chilean  currency  since  the 
outbreak  of  the  war  have  been  another  factor  that  has 
entered  to  discourage  increasing  importations.  Inas- 
much as  such  imports  must  be  paid  in  gold  and  are 
sold  for  paper  currency,  there  necessarily  exists  consid- 
erable uncertainty  with  reference  to  profits.  A  sudden 
fall  in  exchange  may  wipe  out  all  prospective  profits. 
There  exists,  therefore,  on  the  part  of  all  merchants  who 
do  not  wish  to  incur  speculative  risks  a  tendency  to 
await  a  period  of  more  stable  exchange  before  under- 
taking large  purchases. 


Emergency  Measures  Adopted  to  Enable  Merchants 
to  Meet  Conditions  Created  by  the  War 

a.    Moratoria 

One  of  the  first  measures  adopted  was  the  Act  of 
August  7,  1914,  declaring  a  moratorium  of  thirty  days 
for  all  bills  of  exchange,  notes,  and  drafts  payable  dur- 
ing the  month  of  August.  This  law  also  gave  authority 
to  the  President  to  extend  the  moratorium  for  a  further 
period  of  thirty  days.  A  little  later,  September  7,  1914, 
an  act  was  passed  establishing  a  moratorium  of  sixty 
days  for  all  obligations  payable  in  gold  entered  into 
prior  to  August  1,  1914,  and  which  fell  due  between 
that  date  and  November  1.  During  this  period,  how- 
ever, the  debtor  was  required  to  pay  interest  at  the 
stipulated  rate  or,  if  no  such  rate  had  been  agreed  upon, 
at  the  current  rate  of  interest.  Creditors  could,  how- 
ever, demand  the  payment  of  the  amount  due  at  the 
time  when  due,  if  they  were  willing  to  accept  in  payment 
Chilean  paper  money  at  the  rate  for  ninety-day  drafts 
on  London  or  at  the  rate  fixed  by  the  government  for 
the  payment  of  customs  dues.  The  President  of  the 
Republic  was  authorized  by  this  law  to  extend  this 
moratorium  for  a  period  of  thirty  days.  By  decree  of 
October  29,  1914,  he  made  use  of  this  power. 


THE  EUROPEAN  WAR  UPON  CHILE  71 

The  Act  of  February  5,  1915  (Law  No.  2980),  pro- 
vided for  an  additional  extension  of  ninety  days  of  the 
moratorium  for  obligations  due  in  gold  and  authorized 
the  President  to  make  further  extensions  for  periods 
of  sixty  days  until  September  1,  1915.  By  a  series 
of  decrees,  the  last  of  which  was  issued  August  9,  1915, 
the  moratorium  for  such  obligations  was  extended  until 
September  1,  1915.  The  Act  of  February  5,  1915,  also 
provided  for  a  period  of  four  months'  grace,  without 
right  of  protest,  on  all  international  commercial  obliga- 
tions contracted  by  merchants  in  Chile  with  firms 
resident  in  belligerent  countries  or  in  countries  under 
moratorium.  The  four  months'  period  ran  from  the 
date  on  which  the  obligation  fell  due  and  was  only 
applicable  to  obligations  contracted  prior  to  August  1, 
1914.  The  President  was  given  power  to  extend  this 
moratorium  for  periods  of  thirty  days  until  September 
1,  1915.  Availing  himself  of  this  power,  he  published 
a  series  of  decrees,  the  latest  being  dated  August  9, 
extending  the  period  of  grace  to   September  1,   1915. 

b.    Exportation  of  Cattle  and  Food  Products 

By  Act  of  August  3,  1914,  the  President  was  au- 
thorized to  prohibit  the  exportation  of  cattle,  food 
products,  and  coal  for  such  period  as  he  might  deem 
advisable.  The  same  act  gives  to  the  President  the 
power  to  suspend  customs  dues  on  food  products  in 
all  cases  in  which  the  wholesale  price  of  such  products 
exceeds  the  price  quoted  during  the  first  two  weeks  of 
July,  1914. 

On  August  4,  1914,  the  President,  availing  himself  of 
the  power  thus  conferred  upon  him,  issued  a  decree  pro- 
hibiting the  exportation  of  cattle  and  coal,  and  of  a  long 
list  of  food  products.  By  a  later  decree,  that  of  March 
4,  1915,  the  import  duty  of  thirty-six  cents  per  hundred 
pounds  on  wheat  flour  was  suspended  until  June  30, 
1915. 


72  THE  EARLY  EFFECTS  OF 

Transportation  Facilities  as  Affected  by 
the  War 

One  of  the  most  serious  consequences  of  the  European 
War  has  been  the  crippling  of  transportation  facilities 
between  Chile  and  the  European  countries  from  which 
the  supplies  of  manufactured  products  were  obtained. 
It  is  true  that  the  paralyzation  was  temporary,  but  even 
after  the  battle  of  the  Falkland  Islands,  when  the  last 
of  the  German  cruisers  were  driven  from  American 
waters,  the  scarcity  of  bottoms  was  such  that  Chilean 
products  were  compelled  to  wait  at  the  docks  for 
months  for  available  cargo  space.  When  shipping 
facilities  could  be  secured,  it  was  found  in  many 
instances  that  freight  rates  had  advanced  to  such  an 
extent  that  either  shipment  was  impossible  or  the  pos- 
sible profits  of  the  transaction  were  considerably  reduced 
by  reason  of  the  inordinately  high  transportation 
charges. 

Prior  to  the  outbreak  of  the  European  War  the 
steamship  lines  serving  the  West  Coast  of  South  America 
had  reached  an  agreement  with  reference  to  rates  from 
Valparaiso  to  New  York  and  Liverpool  via  Panama 
or  Magellan.  With  the  outbreak  of  the  conflict  these 
schedules  were  thrown  to  the  wind  and  a  system  of 
charging  "  what  the  traffic  would  bear  "  was  inaugurated. 
Since  August,  1914,  freight  rates  have  been  subject  to 
the  most  violent  fluctuations,  depending  entirely  on  the 
relation  of  the  cargo  offered  to  the  available  space. 
Published  rates  can  no  longer  be  depended  upon  as  the 
actual  rates  charged.  To  quote  but  one  instance:  prior 
to  the  outbreak  of  the  war  the  rate  on  nitrate  to  Liver- 
pool varied  from  sixteen  to  twenty  shillings  per  ton.  As 
late  as  July,  1914,  shipments  to  England  were  made 
at  the  former  rate.  The  rate  to  New  York  was  prac- 
tically the  same.  Soon  after  the  outbreak  of  the  war 
rates  advanced  violently  and  in  at  least  one  instance  one 


THE  EUROPEAN  WAR  UPON  CHILE  73 

hundred  shillings  per  ton  were  paid  for  transportation 
of  nitrate  from  Antofagasta  to  Liverpool.  Some  idea 
of  the  advance  in  freights  can  be  obtained  through  a 
comparison  of  the  published  rates,  although  it  is  im- 
portant again  to  emphasize  the  fact  that  to  secure  space 
the  shipper  must  often  pay  a  rate  considerably  in  excess 
of  the  published  rate. 

FREIGHT  RATES  PER  TON  WEIGHT 

Valparaiso  to  New  York  via  the  Panama  Canal 

July  1914  December  1914  July  1915  August  1915 

Copper  bars £2  £2.10.0  $11.25  $11.25 

Copper  ores 1.  2.6  1.17.6  12.00  12.00 

Hides 2.10.0  5.  0.0  25.00  25.00 

Nitrate  (fluctuating  to  such  an  extent  that  quotations  are  impossible) 

Valparaiso  to  Liverpool  via  Magellan 

July  1914  December  1914  July  1915  August  1915 

Copper  bars £2                      £2.10.0  £2.  0.0  £2.10.0 

Copper  ores 1.  6.0                1.15.0  2.10.0  2.10.0 

Hides 2.10.0                4.10.0  4.10.0  4.10.0 

Borate    1.10.0                1.17.6  2.  0.0  2.  0.0 

Nitrate  (constantly  fluctuating) 

The  falling  off  in  tonnage  loaded  and  discharged  in 
Chilean  ports  has  been  as  follows  i1 

MERCHANDISE  LOADED  AT  PORT  OF  VALPARAISO 

1913    466,817  tons 

1914     413,172    " 

January-June,  1914    242,476    " 

"     '        "        1915  216,697    " 

MERCHANDISE  DISCHARGED  AT  VALPARAISO 

1913    1,183,998  tons 

1914    868,467    " 

January-June,  1914  489,983    " 

"    '        "      1915   326,550     " 

MERCHANDISE  LOADED  AT  ALL  CHILEAN  PORTS 

1913    4,735,848  tons 

1914    3,711,146     " 

January-June,  1914  2,243,406    " 

"    "        "      1915   1,714,845     " 

1 1  am  indebted  for  these  figures  to  the  Hon.  L.  J.  Keena,  American  Consul 
General  at  Valparaiso. 


74  THE  EARLY  EFFECTS  OF 

MERCHANDISE  DISCHARGED  AT  ALL  CHILEAN  PORTS 

1913    3,870,072  tons 

1914    3,226,687     " 

January-June,  1914  1,855,489    " 

"      1915   946,602     " 

The  problem  of  improving  transportation  facilities 
between  Chile  and  the  United  States  is  one  that  is  now 
receiving  the  serious  consideration  of  the  Chilean  govern- 
ment. There  exists  a  widespread  desire  not  only  to  add 
to  the  available  bottoms,  thus  reducing  the  heavy  burden 
which  existing  freights  have  placed  on  Chilean  indus- 
tries, but  also  to  improve  the  passenger  facilities  by 
means  of  a  direct  line,  without  trans-shipment,  from 
Valparaiso  to  New  York,  making  the  trip  in  fifteen 
days  instead  of  the  present  unsatisfactory  schedule, 
which  means  from  twenty-three  to  twenty-seven  days, 
with  the  additional  discomfort  of  trans-shipment  at 
Colon.1 

In  normal  periods,  such  as  1913,  the  tonnage  move- 
ment northward  from  Chile  to  the  United  States  is 
approximately  600,000  tons;  the  movement  southward 
is  about  532,000  tons.  This  tonnage  is  divided  as 
follows : 

CHILE  TO  UNITED  STATES              UNITED  STATES  TO  CHILE 
Nitrates    573,773  tons      Oils    350,000  tons 


Copper  and  Regulus 20,270 

Lead    2,112 

Iodine    175 

Antimony 170 

Wool   25 

Miscellaneous    3,475 


Coal  112,500 

Cloth   5,500  " 

Fish   1,200  " 

General  merchandise  ....  63,300  " 


532,500 


600,000    " 

The  problem  to  which  the  Chilean  government  has 
addressed  itself  is  to  formulate  a  policy  which  will  enable 
the  Chilean  merchants  to  enjoy  regular  and  rapid  com- 
munication with  the  United  States  either  through  a 
system  of  direct  subsidies  or  through  liberal  payments 
for  the  transportation  of  mails.     This  desire  and  deter- 

1  November,  1917.  The  establishment  of  a  direct  line  from  New  York  to 
Valparaiso  within  recent  months  will  go  far  towards  solving  the  immediate 
problem. 


THE  EUROPEAN  WAR  UPON  CHILE  75 

mination  have  been  the  direct  outcome  of  the  situation 
created  by  the  European  War.  The  powder  mills  of 
the  United  States  have  become  great  consumers  of 
Chilean  nitrate  and  it  is  the  hope  of  the  government 
that  with  improved  means  of  communication  other 
Chilean  products,  notably  the  fruits  of  the  country,  will 
find  a  market  in  the  United  States. 

While  there  exist  wide  differences  of  opinion  as  to 
whether  such  a  steamship  line  can  be  made  to  pay, 
the  Chilean  government  is  prepared  to  make  sacrifices 
in  order  to  bring  about  closer  relations  with  the  United 
States.  It  is  the  hope  of  both  officials  and  merchants 
that  such  a  demonstration  of  national  goodwill  will  have 
some  influence  on  American  manufacturers  in  inducing 
them  to  adapt  their  business  methods  more  closely  to 
the  credit  system  which  has  prevailed  in  Chile  from  the 
earliest  period  of  her  commercial  development. 


Labor  Conditions  as  Affected  by  the  Wae 

The  difficulties  and  hardships  encountered  by  Chilean 
merchants  and  manufacturers  as  a  result  of  the  Euro- 
pean War  sink  into  insignificance  when  compared  with 
the  widespread  suffering  and  misery  which  the  paralyza- 
tion  of  commerce  and  industry  entailed  upon  the  working 
classes. 

Broadly  speaking,  the  laboring  population  of  Chile 
may  be  divided  into  four  categories,  each  living  under 
totally  different  conditions,  both  of  physical  environment 
and  general  conditions  of  employment. 

First — The  nitrate  laborers  of  the  northern  provinces. 

Second — The  mining  laborers  of  the  northern  and 
central  provinces. 

Third — The  industrial  laborers  of  the  central  provinces. 

Fourth — The  agricultural  laborers  of  the  central  and 
southern  provinces. 


76  THE  EARLY  EFFECTS  OF 

The  Nitrate  Laborers  of  the  Northern  Provinces 

The  laborers  in  the  nitrate  fields  of  the  provinces  of 
Tarapaca,  Atacama,  and  Antofagasta  live  under  condi- 
tions totally  different  from  those  of  the  remainder  of  the 
laboring  population  of  Chile.  Labor  in  the  arid  nitrate 
fields  requires  great  strength  and  endurance  under  the 
most  trying  of  living  conditions.  The  nitrate  regions 
produce  no  food  products  and  the  price  of  fresh  vege- 
tables is  so  high  that  the  nitrate  laborer  is  compelled  to 
live  on  canned  goods.  It  is  true  that  he  receives  a 
wage  far  higher  than  any  other  class  of  Chilean  labor, 
but  it  also  must  be  remembered  that  the  cost  of  all  the 
necessaries  of  life  in  the  nitrate  district  is  exceedingly 
high.  The  daily  wage  of  the  ordinary  laborer  ranges 
from  five  pesos,  ninety  centavos,  to  seven  pesos,  three 
centavos  per  day,  which  at  the  rate  of  exchange  of 
August,  1915,  is  the  equivalent  of  ninety-five  cents  to 
$1.14  American  gold. 

At  the  outbreak  of  the  European  War  53,161  laborers 
were  employed  in  the  nitrate  fields.  We  have  had  oc- 
casion to  describe  the  acute  crisis  through  which  this 
industry  passed  as  a  result  of  the  sudden  closing  of  the 
European  market  and  the  complete  paralyzation  of 
transportation  facilities.  In  August,  1914,  the  nitrate 
works  began  to  shut  down  and  the  government  found 
itself  confronted  with  the  serious  problem  of  taking  care 
of  a  great  army  of  unemployed.  Inasmuch  as  in  this 
entire  district  nitrate  production  is  the  only  possible 
industry  there  was  no  possibility  of  transferring  these 
people  to  other  occupations  in  the  same  district.  As  we 
have  seen,  the  government  endeavored  to  induce  the 
nitrate  producers  to  keep  their  plants  running  by 
advancing  funds  to  those  who  would  agree  not  to  shut 
down.  In  this  effort  they  were  but  partially  successful, 
and  it  was  soon  found  necessary,  in  order  to  prevent 
actual   starvation,   to  transfer   at  government   expense 


THE  EUROPEAN  WAR  UPON  CHILE  ?7 

more  than  thirty  thousand  laborers  with  their  families. 
The  Chilean  laborers  were  taken  to  the  central  provinces, 
the  Bolivians  and  Peruvians  returned  to  their  respective 
countries.  Some  idea  of  the  extent  of  unemployment  in 
this  district  can  be  secured  from  an  examination  of  the 
statistics  of  labor  employed  in  one  of  the  nitrate  provinces 
— that  of  Tarapaca — during  the  year  1914. 

PROVINCE  OF  TARAPACA 
Laborers  Employed  During  Each  Month  of  1914 

January  22,598  July    23,157 

February 22,618  August     17,581 

March    22,777  September 8,347 

April    23,168  October    7,956 

May    23,170  November   7,763 

June    23,509  December    7,506 

This  transfer  to  the  South  did  not  serve  to  relieve 
the  suffering  of  this  large  laboring  population.  While 
agricultural  employment  could  have  been  found  for  a 
large  number,  the  daily  wage  of  the  farm  laborer  in 
Chile  is  so  low  that  these  nitrate  laborers  refused  to 
accept  employment  on  such  terms.1 

The  result  was  that  the  government  was  compelled  to 
maintain  at  public  expense  a  large  army  of  workers  and 
their  families.  Furthermore,  the  willingness  of  a  certain 
number  of  the  nitrate  laborers  to  accept  employment  on 
the  farms  served  still  further  to  depress  the  wage  scale 
of  the  agricultural  laborer. 

Fortunately,  early  in  1915,  the  demand  for  nitrate 
received  a  strong  stimulus  by  reason  of  the  needs  of  the 
powder  factories  in  Europe  and  the  United  States.  By 
that  time,  shipping  facilities  had  also  improved.  As  a 
result  of  these  influences  the  nitrate  plants  that  had  been 
shut  down  began  to  resume  operations  and  the  laboring 

1  The  agricultural  laborer  receives  from  1  peso  to  1  peso  75  centavos  per 
day,  together  with  free  lodging  and  a  pound  of  beans  per  day.  At  the 
present  rate  of  exchange  the  peso  is  worth  16^  cents,  American  gold. 


78  THE  EARLY  EFFECTS  OF 

population  was  not  slow  to  return  to  this  district  of 
relatively  high  wages.  The  nitrate  producers  are  now 
making  every  effort  to  secure  the  immediate  return  of 
their  laborers  and  every  plant  will  soon  be  working  at 
full  capacity.  Every  steamer  from  the  South  is  bring- 
ing hundreds  of  workers  and  at  the  present  writing 
(September,  1915)  the  production  of  nitrate  has  reached 
about  ninety  per  cent  of  normal. 

While,  therefore,  the  war  precipitated  a  period  of 
great  suffering  for  the  nitrate  laborers,  this  period  has 
now  passed. 

The  Mining  Laborers  of  the  Northern  and  Central 

Provinces 

The  most  recent  official  reports  place  the  total  number 
of  laborers  engaged  in  the  mining  industries  in  normal 
times  at  84,619.  Deducting,  therefrom,  the  53,161  en- 
gaged in  the  nitrate  fields,  there  remains  a  balance  of 
31,458  engaged  in  the  other  mineral  industries.  Of  this 
total  18,471  are  employed  in  the  copper  mines  and 
smelters  and  8,414  in  the  coal  mines.  The  remaining 
4,573  are  employed  in  the  iron,  borax,  sulphur,  gold, 
and  silver  mines.  Wages  in  the  mining  industries  are 
relatively  high,  the  average  ranging  from  eighty  cents 
(American  gold)  per  day  in  the  iron  mines  to  $1.00  in 
the  copper  mines.  This  leaves  out  of  account  the  nitrate 
mines,  with  which  we  have  dealt  separately  and  in  which, 
as  we  have  seen,  the  wage  scale  is  higher  than  in  any 
other  of  the  mining  industries. 

"While  the  European  War  brought  about  a  temporary 
paralyzation  of  the  nitrate  industry,  the  other  mineral 
industries  were  less  affected.  The  main  difficulties 
experienced  by  the  copper  producers  were,  first,  a  lack 
of  shipping  facilities,  and  second,  a  scarcity  of  subsidiary 
currency  with  which  to  pay  their  laborers.  The  with- 
drawal of  funds  from  banks  by  depositors   created  a 


THE  EUROPEAN  WAR  UPON  CHILE  79 

scarcity  of  circulating  medium,  which  was  keenly  felt 
by  the  mining  companies  during  the  month  of  August, 
1914.  This  situation  was  soon  remedied  through  the 
facilities  afforded  by  the  "  Caja  de  Emision."  On  the 
other  hand,  the  transportation  problem  was  not  so  easily 
solved  and  for  a  time  proved  a  menace  to  the  mining 
industry. 

In  spite  of  the  unfavorable  conditions  that  prevailed 
immediately  after  the  outbreak  of  the  war,  the  mining 
companies  made  a  determined  effort  to  keep  their  plants 
in  full  operation  and  in  this  effort  were  entirely  success- 
ful. There  was  practically  no  shutting  down  and  as 
early  as  August  11,  1914,  the  manager  of  one  of  the 
largest  copper  mines  informed  the  government  that  if 
he  could  secure  adequate  currency  for  the  payment  of 
his  men,  he  would  be  willing  to  add  to  his  labor  force. 

The  Industrial  Laborers  of  the  Central  Provinces 

Although  the  effect  of  the  European  War  was  most 
keenly  felt  by  the  nitrate  laborers  of  the  northern 
provinces,  the  employees  of  the  manufacturing  estab- 
lishments of  the  central  provinces  also  suffered  severely. 
The  total  number  of  factory  employees  at  the  outbreak 
of  the  war  was  80,697,  distributed  as  follows: 

Industry  Employees 

Breweries  and  distilleries 4,225 

Glass  and  pottery 1,053 

Food  products 12,068 

Gas  and  electricity. 1,218 

Shipyards   1,034 

Clothing    14,016 

Furniture  and  all  other  wood  products 12,393 

Building  supplies  1,365 

Textiles   2,568 

Metal  products  6,880 

Paper  and  printing 4,731 

Leather  and  fur  products 12,279 

Drugs  and  chemical  products 2,871 

Tobacco  products 1,735 

Carriages  and  other  vehicles 1,530 

Miscellaneous     731 

Total    80,697 


80  THE  EARLY  EFFECTS  OF 

This  total  is  made  up  of  53,559  males  and  27,138 
women  and  children. 

In  normal  times,  the  maximum,  minimum,  and  average 
wage  in  each  of  these  industries  and  the  hours  of  labor 
are  as  follows: 


Wages  per  Diem  1 

Industry                                    Skilled  Lowest  paid 

unskilled 

Breweries  and  distilleries $0.60  $0.24 

Glass  and  pottery 0.78  0.24 

Food  products 0.86  0.08 

Gas  and  electricity 0.83  0.32 

Shipyards    0.68  0.36 

Clothing    1.12  0.30 

Furniture  and  other  wood  prod- 
ucts         1.12  0.16 

Building  materials 1.13  0.32 

Textiles    0.94  0.30 

Metal  products   1.45  0.26 

Paper  and  printing 0.96  0.23 

Leather   and   fur  products 1.30  0.21 

Drugs   and  chemicals 0.98  0.16 

Tobacco  products  0.62  0.24 

Carriages  and  other  vehicles 0.66  0.24 


The  financial  crisis  precipitated  by  the  European  War, 
the  restriction  of  credits  by  the  banks,  together  with 
the  uncertainty  as  to  the  future,  led  to  the  immediate 
curtailment  of  production  and  an  alarming  increase  of 
unemployment  in  all  manufacturing  centers.  The  re- 
ports received  from  the  Provincial  Intendentes  indicate 
the  following  situation  with  reference  to  industrial  un- 
employment in  September,  1914: 


Province  Unemployed 

Valparaiso 4,142  (in  the  city  of  Valparaiso). 

Santiago  1,059  (in  the  city  of  Santiago) . 

Coneepci6n No  statistics  given,  but  many  industries  closed. 

Cautin Sawmills  closed. 

Valdivia   Some  breweries  and  factories  working  half  time. 

Many  closed. 
Coquimbo  Many  unemployed.    Factories  have  discharged  por- 
tion of  personnel. 

1  The  American  equivalent  of  wages  is  calculated  on  the  rate  of  exchange 
prevailing  prior  to  the  outbreak  of  war. 


Hours  or 

1  Labor 

Maximum 

Minimum 

14 

9 

13 

10 

14 

9 

16 

13 

9 

9 

11 

8 

12 

9y2 

16 

8 

12 

9 

11 

8 

14^ 

9 

ioy4 

9 

13 

8 

10 

9 

10 

9^ 

THE  EUROPEAN  WAR  UPON  CHILE  81 

In  addition  to  the  widespread  unemployment,  the 
laborers  who  were  retained  in  the  factories  were  com- 
pelled in  many  instances  to  submit  to  a  reduction  of 
wages.  The  latter  part  of  1914  and  the  early  months 
of  1915  witnessed  but  little  improvement  in  the  condition 
of  factory  labor.  Employers  are  unwilling  to  resume 
operations  on  full  time  until  they  can  see  their  way  clear 
with  reference  to  the  bank  credits,  currency  stability, 
and  market  conditions.  Not  until  August,  1915,  was  a 
marked  improvement  in  the  manufacturing  industries 
noticeable.  The  recovery  of  the  nitrate  industry  has 
reacted  on  manufacturing  activities,  stimulating  the  re- 
sumption of  work.  Although  there  still  exists  consider- 
able unemployment,  there  is  every  indication  that  by 
the  close  of  the  year  1915  manufacturing  will  again 
have  reached  a  normal  level. 

The  Agricultural  Laborers  of  the  Central  and  Southern 

Provinces 

The  agricultural  laborers  suffered  less  in  consequence 
of  the  European  War  than  any  other  section  of  the 
laboring  population.  This  is  due  to  two  circumstances. 
First,  to  the  fact  that  the  agricultural  interests  of  Chile 
suffered  but  little  as  a  result  of  the  war,  inasmuch  as 
the  prices  of  food  products  showed  a  marked  tendency 
upwards.  The  difficulties  which  the  large  landowners 
encountered  were  due  almost  entirely  to  the  restriction 
of  credits,  which  in  some  sections  led  to  the  discharge 
of  farm  laborers.  The  second  circumstance  which  ex- 
plains the  relative  immunity  of  the  agricultural  laborer 
from  the  disastrous  effects  of  the  war  is  the  exceedingly 
low  wage  and  low  standard  of  life  of  this  section  of  the 
population.  Chile  is  a  country  of  large  landed  estates. 
Agricultural  labor  receives  a  wage  which  ranges  from 
twenty  to  forty  cents1  per  day,  together  with  a  ration 

1  At  the  rate  of  exchange  immediately  preceding  the  war. 


82  THE  EARLY  EFFECTS  OF 

which  usually  takes  the  form  of  from  one  to  two  and  one- 
fifth  pounds  of  beans.  In  addition,  the  proprietor  fur- 
nishes habitation  which  is  usually  of  the  most  primitive 
type.  Laborers  are  usually  given  the  use  of  a  small  tract, 
about  half  an  acre,  on  which  they  may  raise  produce 
for  their  personal  consumption.  This  latter  privilege  is 
only  enjoyed  by  the  so-called  "  Inquilinos,"  who  differ 
from  the  ordinary  farm  laborer  by  reason  of  more  per- 
manent tenure.  In  most  provinces  they  also  receive  a 
somewhat  higher  wage  than  the  more  transient  day 
laborer  but  in  return  are  required  to  perform  certain 
extra  services.  In  some  cases  they  are  obliged  to  furnish 
to  the  landowner  one  additional  laborer.  It  should, 
furthermore,  be  added  that  the  exceedingly  low  wage 
of  the  "  Inquilino  "  is  sometimes  supplemented  by  minor 
earnings  of  wife  and  children  in  the  dairies  attached  to 
the  estates. 

The  great  influx  of  nitrate  laborers  from  the  North 
led  to  a  superabundance  of  farm  labor.  During  the 
latter  part  of  1914  there  was  a  tendency  to  reduce  wages, 
as  will  be  seen  from  the  following  reports  from  the 
agricultural  provinces. 

PER  DIEM  WAGE1  PER  DIEM  WAGE1 

Without  Ration  With  Ration 

Province                           Inquilino         Laborer  Inquilino  Laborer 

Aconcagua $0.30               $0.28  $0.25  $0.21 

Valparaiso  0.40                 0.34  0.30  0.22 

O'Higgins    0.40                 0.34  0.28  0.26 

Colchagua    0.40                 0.40  0.30  0.22 

Curic6 0.30                 0.28  0.22  0.20 

Talca    0.40                 0.37  0.18  0.22 

Nuble    0.20                  0.18  0.16  0.22 

Conception 0.24                 0.24  0.23  0.22 

Government  Measures  to  Meet  the  Problem  of 
Unemployment 

The  labor  problem  confronting  the  Chilean  government 
at  the  outbreak  of  the  European  War  was  an  exceedingly 
serious  one,  owing  to  the  necessity  of  transporting  so 

1  Estimated  in  American  gold. 


THE  EUROPEAN  WAR  UPON  CHILE  83 

large  a  proportion  of  the  nitrate  labor  of  the  North  to 
the  central  provinces.  Although  receiving  a  relatively- 
high  wage,  the  habit  of  saving  has  never  been  developed 
in  the  poorer  classes.  The  government  saw  itself  con- 
fronted with  the  necessity  not  only  of  giving  free  trans- 
portation to  a  great  mass  of  laborers  and  their  families, 
but  also  of  supporting  them  unless  some  plan  could  be 
devised  to  secure  employment  for  them.  To  meet  this 
emergency,  a  National  Labor  Bureau  was  organized 
which  has  done  excellent  service  in  securing  employment 
for  at  least  a  portion  of  the  great  army  of  unemployed. 
Between  August  18,  the  date  of  the  establishment  of  the 
Bureau,  and  November  17,  1914,  this  agency  had  secured 
employment  for  7,686  persons  distributed  as  follows: 

Number  for 
Whom  Employ- 
Character  of  Work  ment  Secured 

Public   works    1,530 

Public  roads   3,863 

Factories  and  workshops 458 

Agriculture    1,835 

7,686 

The  magnitude  of  the  unemployment  problem  is  made 
evident  by  the  fact  that  during  the  first  four  months  after 
the  outbreak  of  the  war  the  government  brought  29,919 
persons  from  the  nitrate  district  to  the  ports  of  Coquimbo 
and  Valparaiso.  The  situation  was  further  complicated 
by  the  fact  that  the  nitrate  laborer  of  the  North  is  the 
least  adaptable  and  the  most  restless  element  of  the  labor- 
ing population.  It  soon  developed  that  employment 
could  only  be  found  for  a  relatively  small  percentage  of 
the  total  and  that  in  many  cases  offers  of  employment 
were  met  with  a  refusal  to  work  for  a  wage  less  than 
that  to  which  they  had  been  accustomed  in  the  nitrate 
fields.  The  result  was  that  the  government  found  itself 
compelled  to  support  the  greater  part  of  the  unemployed 
for  a  period  of  several  months.     Throughout  the  country 


84  EFFECTS   OF   WAR   UPON   CHILE 

the  situation  was  regarded  as  involving  a  serious  menace 
to  the  social  order  of  the  Republic. 

The  return  of  the  nitrate  laborers  to  the  North  has 
also  served  to  improve  somewhat  the  condition  of  agri- 
cultural labor.  For  the  harvesting  of  the  present  crop 
there  will  probably  be  a  scarcity  of  labor  which  will,  no 
doubt,  bring  about  some  little  improvement  in  the  wages 
of  the  transient  farm  laborer. 

While  there  has  been  this  distinct  improvement  in  the 
condition  of  mining  and  farm  labor,  the  status  of  the 
factory  workers  has  not  advanced  in  the  same  ratio. 
The  manufacturing  establishments  that  closed  are 
slowly  resuming  operations  and  those  that  discharged 
a  portion  of  their  labor  force  are  not  adding  thereto. 
Restriction  of  credits  by  the  banks,  together  with  the 
uncertainties  incident  to  fluctuating  exchange,  has 
created  an  atmosphere  of  distrust  which  is  proving  a 
serious  obstacle  to  the  recovery  of  manufacturing 
enterprise. 


CONCLUSION 

The  widespread  suffering  caused  throughout  Chile  by 
reason  of  the  European  conflict  is  but  another  indication 
of  how  deeply  the  vital  interests  of  the  republics  of 
America  have  been  affected.  Not  only  were  government 
finances  seriously  impaired  but  almost  every  branch  of 
industrial  life  suffered  a  severe  shock. 

From  a  strictly  governmental  point  of  view  the  crisis 
has  not  been  an  unmixed  evil,  inasmuch  as  it  has  brought 
into  the  foreground  of  public  attention  the  necessity  of 
undertaking  some  systematic  revision  of  the  national 
fiscal  system.  Basic  industrial  and  economic  conditions 
in  Chile  are  today  essentially  healthy,  and  will  enable  the 
country  rapidly  to  emerge  from  the  crisis  precipitated  by 
the  war. 

Another  effect  of  the  war,  which  may  prove  of  indirect 
benefit  to  the  country,  is  the  fact  that  the  crisis  pre- 
cipitated by  the  European  conflict  has  served  to  impress 
upon  the  business  men  of  the  country  the  dangers  in- 
volved in  the  dependence  on  foreign  capital.  The  bitter 
lessons  of  the  recent  financial  crisis  have  shown  that  what 
Chile  needs  most  is  a  larger  measure  of  financial  inde- 
pendence, and  that  this  can  be  secured  only  through  the 
development  of  the  habit  of  saving  amongst  her  people. 
The  wealth  and  resources  of  the  country  and  the  energy 
of  the  inhabitants  would  lead  one  to  expect  a  larger  sum 
total  of  native  capital.  With  such  great  resources,  with 
no  racial  problems  of  a  serious  or  vital  character,  Chile's 
future  depends  entirely  on  the  extent  to  which  her 
population  is  willing  to  make  present  sacrifices  for  larger 
ultimate  returns. 


APPENDICES 


■ 


■ 


APPENDIX  A 

IMPORTS  OF  UNITED  STATES  FROM  CHILE  * 

Year  Ending  June  SO 

Quantities  Values 

1913  1914  1913  1514 

Antimony    ore,    regulus    or 

metal,  lbs.    (dut. ) 341,597       $20,496     $ 

Articles,  the  growth,  produce, 
or  manufacture  of  the 
United  States,  returned 

(free)     19,317  20,474 

Art  works  (free)    92  169,250 

Bladders,    integuments,    etc. 

(free)     6,099  5,572 

Chemicals,   drugs,  dyes  and 
medicines : 
Extracts  for  tanning,  lbs. 

(free)     157,795  8,509 

Iodine,     crude    or    resub- 

limed,   lbs.    (free)    351,236  195,030  739,734         423,293 

Soda,     nitrate     of,     tons 

(free)     573,773  561,209         19,942,419     17,808,763 

All  other   (free)    10,320         101,588 

Coal,  bituminous,  tons  (free)  20(dut.)  1,007  182(dut.)  6,035 

Copper,  and  manufactures  of : 
Ore      (copper     contents), 

lbs.    (free)    14,096,944     15,213,097  2,242,784      1,974,429 

Matte  and  regulus  (copper 

contents)    lbs.    (free)..   13,436,913     13,289,555  2,165,418      2,004,898 

Pigs,     ingots,     etc.,     lbs. 

(free)     14,004,408     14,426,881  2,248,311       2,145,748 

Fertilizers  (free)    395,948 

Fruits  and  nuts: 
Walnuts,     unshelled,     lbs. 

(dut.)     443,713      3,120,824  33,832         253,622 

Furs  and  fur  skins,  un- 
dressed (free)    32,256  7,144 

Hides  and  skins,  etc.: 

Goat,  dry,  lbs.   (free) 31,674  13,028  5,081  2,538 

Household  and  personal  ef- 
fects, etc.    (free)    5,637  8,721 

India  rubber  scrap,  fit  only 
for  remanufacture,  lbs. 

(free)     33,746       2,450       

Iron  ore,  tons    (free) 6,600  7,829 

J"  Trade  of  the  United  States  with  other  American  Countries,  1913-1914." 
(United  States  Bureau  of  Foreign  and  Domestic  Commerce.) 


90 


APPENDIX  A 


Lead  and  manufactures  of: 
Lead  ore    (lead  contents) 

lbs.    (dut.)    

Bullion   and   base   bullion 

lbs.    (dut.)     

Meat  products;  sausage  cas- 
ings, lbs.   (free)    

Tin    in    bars,    blocks,    pigs, 

etc.,   lbs.    (free)     

Wax:  beeswax,  lbs.  (free) . . 

Wool  of  the  sheep,  hair  of 

the     camel    and    other 

like  animals: 

Class     1:     Clothing,     lbs. 

( free )    

Class  3 :  Carpet,  lbs.  ( free ) 
Wool,    hair    of    the    camel, 
goat,  alpaca,  and  other 
like  animals: 
Class     1:     Clothing,     lbs. 

(dut.)     

Class      3:      Carpet,      lbs. 

(dut.)    

Zinc  ore  (zinc  contents)  lbs. 

(dut.)     

All  other  free  and  dutiable 
goods   

Total  free  of  duty.... 
Total  dutiable 


Quantities 
1913  1914 

4,223,430      5,315,937 

2,673,030 

18,862       


39,173 
32,926 


33,085 

16,693 

2,304,742 


108,983 


127,299 
73,225 


23,380 
40,948 


Values 
1913  1914 

$  88,692      $  182,622 
91,994 


14,639 

12,418 
9,874 


36,975 


33,969 
9,383 


4,982  3,735 

1,673  4,027 

46,095       

2,619  15,062 


$27,458,211  $25,184,940 
197,209  537,188 


Total  imports  of  merchandise $27,655,420  $25,722,128 


EXPORTS  OF  UNITED  STATES  TO  CHILE 


Domestic  Exports 

Abrasives : 
Wheels,  emery  and  other 

All  other    

Agricultural  implements  and 
parts  of: 
Hay    rakes    and    tedders 

Mowers  and  reapers 

Planters  and  seeders   

Plows  and  cultivators    . . 

Threshers    

All  other,  and  parts  of. . 
Aluminum,     and     manufac- 
tures of  


Quantities 


1913 


1914 


Values 

1913 

1914 

$4,868 
14,357 

$2,188 
8,807 

2,063 
87,579 

3,949 
119,614 
108,236 
112,207 

3,720 
85,155 

3,885 

94,496 

107,330 

94,882 

1,218 


1,938 


1  "  Trade  of  the  United  States  with  other  American  Countries,  1913-1914." 
(United  States  Bureau  of  Foreign  and  Domestic  Commerce.) 


APPENDIX  A  91 

Quantities  Values 

1913  1914  1913  1914 

Animals : 

Cattle,    No 20  17  $     2,260      $       3,725 

All  other,  including  fowls     2,573  641 

Asbestos   (manufactures  of)     2,919  4,974 

Asphaltum : 

Unmanufactured     (tons)  .  129  1,158  4,129  35,875 

Manufactures  of 73  14,472 

Babbitt  metal  (lbs.)    139,213  65,633  32,599  11,231 

Blacking      ( including     shoe 
paste    and    polish    and 

other)     27,413  18,506 

Brass,  and  manufactures  of 30,737  31,603 

Breadstuffs : 

Barley    (bush.)    184,062  1,459  134,633  790 

Oatmeal    (lbs.)    474,434         477,321  23,424  24,845 

Preparations  of,  for  table 

food    4,742  4,645 

Wheat  flour    (bbls.)    28,781  152,324  114,414         574,456 

All  other    13,925  1,404 

Broom    corn,    and     manufac- 
tures  of    18,802  9,705 

Brushes 843  2,178 

Cars,   carriages,   other  vehi- 
cles, and  parts  of: 
Automobiles — 

Commercial    (No.)    2  10,743 

Passenger    (No.)     78  195  109,982  160,194 

Parts,    not    including   en- 
gines and  tires   4,711  22,405 

Carriage   (No.)    358  109  40,288  12,118 

Cars,  passenger  and  freight: 
For  steam  railways — 

Passenger    192,639         138,547 

All  other    271,002  7,375 

For  other  railways 57,443  134,991 

Bicycles,  tricycles,  etc 2,566  2,506 

Motorcycles   (No.)    39  37  8,134  7,967 

Wagons    (No.)     81  131  7,577  13,161 

Wheelbarrows,     pushcarts 

and  handtrucks 10,827  7,490 

All  other,  and  parts  of 15,479  21,379 

Cement,  hydraulic  (bbls.)..  38,449  26,203  51,823  35,807 

Chemicals,  drugs,   dyes  and 
medicines : 
Acids — 

Sulphuric    (lbs.)     327,673      4,150,910  3,889  48,277 

All  other    2,172  3,415 

Baking  powder   (lbs.)    ...          22,037           29,762  7,929  10,663 
Calcium  carbide   (lbs.)    ..     1,584,000      2,797,440               49,231            72,289 
Medicines,  patent  or  pro- 
prietary                   235,640         200,918 

All   other    70,444  71,874 

Clocks     and     watches     and 
parts  of: 

Clocks,  and  parts  of 17,000  9,523 

Watches,  and  parts  of 19,979  18,553 

Coal,  bituminous    (tons)    ..        112,067            83,876  324,153  252,490 

Confectionery 2,879  3,494 


92 


APPENDIX  A 


Copper,  manufactures  of: 
Pigs,     ingots,     and     bars 

(lbs.)     

Plates  and  sheets    (lbs.) 
Rods  and  wire    (lbs.)    ... 
All  other  manufactures  of 
Cotton  manufactures  of: 
Cloths- 
Unbleached   ( yds. )    .... 

Bleached    (yds.)    

Colored    (yds.)     

Laces  and  embroidery  . . . 
Waste,  cotton  ( lbs. )  .... 
Wearing  apparel — 

Corsets 

Knit  goods    

All  other    

All  other 

Dental   goods    

Earthen,  stone  and  China 
ware: 

Bricks,  fire    (M)    

Tiles,  except  drain    

All  other    

Eggs    (doz.)     

Electrical  machinery,  appli- 
ances, and  instruments: 
Dynamos,  or  generators . . 
Insulated  wire  and  cables 
Interior  wiring  supplies, 
etc.  (including  fixtures) 
Lamps — 

Arc     ( No. ) 

Incandescent — 
Carbon  filament  (No.) 
Metal  filament   (No.) 

Motors   

Static  transformers   

Telephones    

All  other    

Explosives : 

Cartridges  

Dynamite   ( lbs.)    

Gunpowder    ( lbs. )    

All  other    

Feathers    

Fibers,  vegetables,  and  tex- 
tile grasses,  manufac- 
tures of: 

Cordage  ( lbs. )    

Twine — 

Binder    ( lbs. )    

All   other    

All  other  manufactures  of 
Fish: 

Salmon,   canned    (lbs.)  . . . 

Shellfish    

Fly  paper  


81 

73,296 
89,349 


Quantities 

Values 

1913 

1914 

1913 

1914 

1,309 

4,837 

10,295 

117,636 

408,125 

79,772 

$   239 

932 

1,727 

4,626 

$  21,010 

76,268 

13,702 

147,832 

8,346,412 

1,870,722 

280,214 

27,782 

9,590,339 
448,252 
215,378 

52,644 

537,105 

129,032 

23,269 

2,123 

660,091 

44,069 

18,585 

3,750 

3,741 

3,037 
17,583 
31,215 
65,310 
20,338 

9,895 
22,576 
37,431 
89,406 
21,839 

158 
270 

245 
9,875 

16,434 

1,225 

8,610 

73 

23,822 
6,242 

15,016 
2,414 

15,777 

19,687 
45,952 

90 

53,275 
31,996 


961,850  912,485 

5,452  15,625 


206,169  202,177 

320,111       1,013,110 


2,318,720      2,123,237 


1,958 

8,377 

17,701 

104,279 

4,600 
201,542 

60,950 

100,384 

1,741 

25,893 

8,283 


22,444 

22,121 
6,055 
2,279 

143,574 

11,928 

5,562 


26,175 

1,880 

6,780 

8,344 

92,747 

37,839 

3,374 

166,141 

45,220 

107,087 

5,270 

15,134 

7,489 


22,436 

87,213 
8,077 
7,888 

134,678 

13,745 

4,003 


APPENDIX  A 


93 


Quantities 
1913  1914 


Fruits : 
Green,  ripe  or  dried   .... 
Prepared  or  preserved    . . 

Furniture  of  metal 

Glass  and  glassware 

Glucose   ( lbs. )    

Gold    and    silver,    manufac- 
tures of,  including  jewelry 

Grease  

Household  and  personal  ef- 
fects   

India   rubber,    manufactures 
of: 
Belting,  hose  and  packing 
Boots  and  shoes — 

Boots   (pairs)    

Shoes    (pairs)    

Tires: 

For  automobiles    

All  other    

All  other  manufactures  of 

Ink 

Instruments   and   apparatus 
for  scientific  purposes : 
Medical   and   surgical   in- 
struments     

All  other    

Iron   and   steel,   and  manu- 
factures of: 

Pig  iron    (tons)    

Bars    or     rods     of     steel 

(lbs.)     

Bolts,    nuts,     rivets    and 

washers    ( lbs. )     

Builders'  hardware — 

Locks   

Hinges  and  others  .... 

Car  wheels    ( No. )    

Castings,  n.e.s 

Cutlery : 

Razors   

Table    

All  other    

Enamelware : 

Bath  tubs   (No.)    

Lavatories  and  sinks  . . 

All  other    

Firearms    

Machinery,   machines  and 
parts  of: 

Adding  machines    (No.) 
Air-compressing  ma- 
chinery     

Cash  registers  ( No. )    . . 
Engines  and  parts  of: 
Electric      locomotives 
(No.)     


745,753         586,801 


2,001 
20,434 


930 
9,957 


938  1,465 

12,281,617     14,535,376 

783,209       1,011,037 


950 


590 


291 


278 


8 

38 

139 

188 

5 

2 

Values 

1913 

1914 

2,585 

6,121 

14,710 

30,823 

18,658 

$   5,466 

5,136 

16,345 

40,224 

14,808 

12,686 
75,056 

2,831 
80,208 

16,871 


57,970 


2,271 

17,646 
21,211 


16,918 


13,216 


71,113 


8,720 

4,643 

12,677 

5,676 

2,844 

10,636 

31,076 

19,805 

24,812 

27,383 

12,201 

12,408 

6,059 

5,750 

12,564 

19,341 

13,637 

18,289 

206,922 

237,433 

29,421 

35,986 

30,424 

30,829 

51,611 

69,033 

8,030 

4,501 

3,627 

8,648 

3,126 

6,364 

3,894 

6,232 

16,609 

15,154 

5,368 

5,372 

11,612 

5,705 

3,324 

2,463 

38,861 

45,789 

6,898 

11,484 
25,373 


4,112 


94 


APPENDIX  A 


Iron  and  steel,  and  manu- 
factures of:    (Cont.) 
Internal  combustion — 
Gas,      stationary 

(No.)     

Gasoline — 

Marine    ( No. )    . . 

Stationary    ( No. ) 

Traction    (No.).. 

Steam — 

Locomotives   (No.)  . 

Stationary    (No.)  . . 

Traction   (No.)    ... 

All     other     engines 

(No.)    

Parts  of   

Laundry  machinery   . . . 

Lawn  mowers    

Metal  working  machinery 
Milling  machinery  (flour 

and  grist)    

Mining  machinery    .... 

Printing  presses    

Pumps     and     pumping- 

machinery     

Refrigerating  machinery 
including     ice-making 

machinery   

Sewing  machines    

Shoe   machinery    

Sugar  mill  machinery.. 

Typesetting      machines, 

linotype  and  others . . 

Typewriting      machines 

Windmills    

Woodworking    ma- 
chinery : 
Sawmill    machinery. . 

All   other    

All     other     machinery, 

and  parts  of    

Nails  and  spikes: 

Cut    (lbs.)     

Railroad     spikes     ( lbs. ) 

Wire    (lbs.)    

All    other    (including 

tacks )    ( lbs. )    

Pipes   and    fittings    (lbs.) 
Kails     for     railways,     of 

steel    ( tons )     

Railway     track     material, 
etc.     (except    rails    and 

spikes )     

Scales   and   balances    .... 
Sheets  and  plates: 
Iron — 

Galvanized     ( lbs. )     . . 
All  other   (lbs.)    


Quantities 
1913  1914 


25 
17 


18 
20 


58 


10 

58 

28 

4 

23 

28 
17 

28 


5,105,182  5,775,023 

175,677  202,664 

352,860  520,799 

328,026  333,882 

3,540,988  7,926,138 


13,939 


11,160,505 
350,344 


7,302 


88,191 
221,005 


Values 
1913     1914 


$  4,432  $   1,798 


2,599 
1,853 


202,753 
13,579 


12,480 

27,478 

4,401 

8,296 

43,930 

58,246 

182,017 

7,438 

73,527 


55,747 
42,587 


337,075 

8,427 


5,942 

4,398 

10,540 

190,944 
23,904 
32,679 

7,920 
74,657 

7,427 

436 

85,168 

42,576 

274,421 

5,074 

61,713 


21,299 

94,774 

58,247 

7,345 

18,656 

42,886 

43,350 

370 

9,421 

117,023 

22,226 

29,379 
95,026 
27,686 

37,099 
39,799 

24,147 
28,049 

260,647 

327,058 

91,089 
3,400 
7,749 

105,249 

3,395 

10,627 

16,213 
111,932 

16,791 
226,780 

458,827    253,166 


83,939 
43,195 


2,653 
5,537 


APPENDIX  A  95 

Quantities  Values 
1913               1914                  1913  1914 
Iron  and  steel,  and  manu- 
factures of:    (Cow*.) 
Steel- 
Plates    (lbs.)    4,008,851       7,557,603           $67,529      $130,276 

Sheets    (lbs.)    25,005,801     22,969,765  750,000         630,098 

Stoves,   ranges,  and  parts 

of    23,093  23,072 

Structural   steel  and  iron 

(tons)    5,859  8,759  232,181  450,213 

Tin     plates,     terneplates, 

and    taggers   tin    (lbs.)     4,799,351       4,252,521  180,188  157,442 

Tools,  n.e.s.: 

Axes    (No.)     16,311  14,948  10,454  10,011 

Hammers   and    hatchets     15,268  15,636 

Saws     44,836  33,435 

Shovels  and  spades 3,231  7,758 

All   other    120,955         117,129 

Wire  and  manufactures  of 
wire: 

Barbed    (lbs.)    2,781,555       3,517,910  70,093  83,783 

All  other    (lbs.)    20,209,057       7,790,153  408,531  156,445 

Manufactures  of 53,153  50,067 

All  other  manufactures  of 

iron   and  steel    257,752         244,364 

Lamps,  chandeliers,  etc.  (ex- 
cept electric)    26,295  15,513 

Lead,  manufactures  of 10,006  128,628 

Leather    and    tanned    skins, 
and  manufactures  of: 
Leather  and  tanned  skins — 

Belting    27,607  13,672 

Patent    35,599  56,305 

Upper — 

Calf    (sq.    ft.)     176,376         218,532  47,173  62,312 

Glazed    kid    (sq.    ft.)     2,524,490       1,317,127  482,929         238,924 

All   other    16,082  5,820 

All     other     leather     and 

tanned  skins    2,194  10,641 

Manufactures   of   boots  and 
shoes ; 

Children's   (pairs)    616  2,010  685  2,153 

Men's     boots     and     shoes 

(pairs)     48,204  38,817  140,626  118,587 

Women's    (pairs)    12,394  18,311  33,722  51,621 

All  other 43,412  26,595 

Leather,  imitation 1,675  2,076 

Meat  and  dairy  products: 
Meat  products — 
Beef  products — 
Beef,      pickled      and 

other    cured     (lbs.)  68,748  24,000  7,461  2,578 

Oleomargarine,   imita- 
tion   butter     (lbs.) 

Tallow    (lbs.)     

All  other    (lbs.)    

Hog  products — 
Hams    and    shoulders 

(lbs.)     16,882  25,061  2,655  4,226 


79,293 

131,311 

8,655 

14,481 

133,505 

404,029 

9,104 

26,546 

78,667 

8,559 

9,561 

1,236 

96 


APPENDIX  A 


1913 


Quantities 


1914 


Meat  and   dairy  products: 
(Cont.) 

Lard    (lbs.)    1,934,928       1,866,147 

Pork,    pickled     (lbs.)  34,500  28,500 

Lard,  compound,  and  other 
substitutes      for       lard 

(lbs.)     1,791,802       1,411,417 

All  other   

Dairy  products — 

Butter  and  cheese  (lbs.)  1,539  8,245 

Milk- 
Condensed    (lbs.)    ...  25,531  118,501 

Other,  including  cream     

Motor  boats 11  8 

Musical     instruments,     and 
parts  of: 
Pianos — 
Player  pianos   (No.)...  75  11 

All  other   (No.)    169  161 

Perforated  music  rolls 

All  other,  and  parts  of 

Naval  stores: 

Resin    (bbls.)     11,413  4,739 

Turpentine,  spts.  of  (gals.)         131,005  84,460 

Oilcloth 

Oils: 

Animal     (gals.)     1,578  3,225 

Mineral — 
Crude,  including  all  nat- 
ural oils,  without  re- 
gard to  gravity  (gals. )  500 
Refined  or  manufactured — 
Illumination       oil 

(gals.)     7,961,224 

Lubricating  and  heavy 

paraffin   oil    (gals.)     1,774,587 

Gasoline   (gals.)    34,615 

All     other,     naphtha, 

etc.     (gals.)     324,696  53,189 

Residuum,  etc. — 

Gas  oil  and  fuel  oil 

(gals.)     58,244,417     77,566,178 

All  other    (gals.)    ...   19,857,507     64,543,524 
Vegetable,  fixed  or  expressed — 

Cottonseed   (lbs.)    3,639,389      4,921,207 

Linseed     or      flaxseed 

(gals.)    3,423  5,058 

All  other    

Paints,  pigments,  colors  and 
varnishes : 
Ready-mixed  paints  (gals.)  17,464  16,051 

Varnish    (gals.)     8,845  7,364 

All  other,  including  crayons     

Paper,  and  manufactures  of: 


Values 
1913  1914 


Books,    music,    maps,    en- 
gravings,   etchings,    etc. 
Carbon  paper  


$229,413 
3,901 


149,563 
3,010 

519 

2,118 

3,712 

16,186 


24,647 

41,490 

9,363 

3,360 

80,907 

65,342 

2,926 

1,275 


77,725 


923,801 
303,912 


1,859 
18,325 


29,412 

9,768 

24,100 

1,980 

269,879 
1,563 


222,012 
3,151 


130,432 
4,622 

1,469 

9,288 
1,393 
8,035 


3,705 

41,585 

2,882 

1,344 

24,298 
43,569 
10,972 

2,872 


6,636,000 

27 

118,500 

9,125,953 

900,771 

1,028,155 

1,960,331 
747,930 

392,945 
9,348 

418,279 
166,724 

12,412 


1,365,661 
978,662 


296,752         436,672 


2,598 
11,982 


26,829 
10,712 
23,552 

2,884 

109,509 
8,108 


APPENDIX  A  97 

Quantities  Values 

1913  1914  1913  1914 

Paper,  and  manufactures  of : 
(Cont.) 

Paper  hangings $     4,440     $       2,374 

Playing  cards    7,970  6,032 

Printing  paper — 

Newsprint    (lbs.)    ....     3,091,416       1,493,973  75,692  37,141 

All  other    (lbs.)    1,047,745         913,419  48,207  40,665 

Wrapping  paper   (lbs.)    ..          20,681           27,545  802  1,071 
Writing     paper     and     en- 
velopes                  12,228             6,968 

All   other    19,778  18,851 

Paraffin,    and    paraffin    wax 

(lbs)     1,477,818       2,282,161  54,023  92,098 

Pencils    (except   slate)    and 

pencil  leads    4,825  3,641 

Penholders  and  pens 3,168  6,501 

Perfumeries,   cosmetics,  and 

all  toilet  preparations 21,645  25,437 

Phonographs,  graphophones, 
gramophones  and  rec- 
ords, and  materials  for     

Photographic  goods: 

Cameras    

Motion  picture  films   (lin. 

ft.)     2,400         116,977 

Other  sensitized  goods 

All   other    

Plated  ware,  except  cutlery 

and  jewelry 

Plumbago,  or  graphite,  and 

manufactures  of 

Roofing     felt,     and     similar 

materials 

Silk,  manufactures  of 

Soap — 

Toilet,  or  fancy 

All  other    (lbs.)    202,562         244,971 

Spirits,  wines,  malt  liquors, 

and  other  beverages  

Stone    (including  marble) 

Surgical  appliances  (not  in- 
cluding instruments) 

Tin,  manufactures  of 

Tobacco,   and   manufactures 

of    

Toys 

Trunks,  valises,  and  travel- 
ing bags    

Type   (lbs.)    9,088  7,676 

Typewriter  ribbons    

Vegetables : 

Potatoes,  except  sweet  po- 
tatoes      7,709  8,950 

Vegetables,  canned 

All   other    

Wood  and  manufactures  of: 
Logs  and  other  round  tim. 
ber    (M.  ft.)    10  500  100  5,000 


41,395 

44,213 

6,372 

6,158 

175 

14,143 

5,000 

5,468 

17,978 

5,134 

26,498 

27,303 

1,341 

2,297 

5,439 
1,159 

2,462 
5,276 

113,862 
12,593 

91,330 
16,290 

4,524 
6,700 

6,793 
6,304 

16,411 

7,824 

28,351 
5,992 

5,647 

7,474 

7,045 
4,094 

1,748 
3,658 
6,063 

2,610 
2,959 
4,777 

5,474 
1,360 
3,685 

7,152 
12,310 

4,762 

98  APPENDIX  A 


Quantities 

Values 

1913 

1914 

1913 

1914 

Wood  and  manufactures  of: 

(Cont.) 

Lumber : 

Boards,  planks  and  deals — 

Fir    (M.  ft.)    

63,271 

58,229 

$776,626 

$  727,970 

Oak    (M.   ft.)     

349 

270 

27,099 

21,869 

White    pine    (M.    ft.) 

98 

299 

4,850 

9,692 

Yellow  pine,  pitch  and 

other    (M.   ft.)    ... 

218 

363 

12,093 

20,844 

All  other    (M.   ft.).. 

386 

126 

23,581 

10,568 

Staves    ( No. )    

99,875 

151,091 

18,504 
4,642 

28  278 

Doors,  sash  and  blinds   . . 

8,551 

151,004 

115,869 

Incubators  and  brooders . . 

3,361 

3,924 

Trimmings,   moldings   and 

other  house  finishings . . 

9,209 

4,228 

3,379 

3,121 

All  other  manufactures  of 

83,506 

90,947 

Wool,  manufactures  of: 

359 

3,385 

All  other    

15,336 

6,510 

Zinc,  and  manufactures  of . . 

1,874 

4,240 

46,649 

56,712 

Total  Domestic  Exports   $16,064,969  $17,408,724 

Total  Fobeign  Expobts   11,794  23,668 


Total   Expobts   of   Meb- 
CHANDISE $16,076,763  $17,432,392 


APPENDIX  B 


TRADE  WITH  UNITED  STATES,  1913-1914 


Expobts 

Months  1913  1914 

January-July    $18,979,949  $14,745,891 

August    2,314,912  1,207,613 

September   3,010,449  2,104,309 

October    934,114  2,238,189 

November    1,827,465  2,286,714 

December    2,486,934  1,655,997 

Total  fob  Yeab.  .  $29,553,823  $24,238,713 


Imposts 

1913                1914 

$9,129,794     $10,203,716 

1,393,553            596,196 

1,375,822            462,470 

2,221,572         1,369,168 

578,270           700,890 

1,917,901            295,178 

$16,616,912 

$13,627,618 

IMPORTS  AND  EXPORTS,  1913  * 


Great  Britain   . . . 

Germany   

United  States  .... 

France   

Belgium   

Gband  Total 


Imposts  fbom 
$55,548,341 
30,772,742 
30,413,385 

8,847,885 
5,674,869 

$142,801,576 


Expobts  to 

$36,028,943 

29,578,138 

20,089,158 

6,623,260 

5,671,426 

$120,274,001 


THREE  PRINCIPAL  IMPORTING  COUNTRIES 


1908 
1909 
1910 
1911 
1912 
1913 
1914 
1915 


United 
States 
$8,697,209 
9,601,084 
13,369,774 
15,775,969 
16,806,341 

United 
Kingdom 
$30,630,809 
31,842,746 
34,340,573 
40,795,279 
38,599,283 

Gebmany 
$27,555,784 
22,435,041 
26,296,071 
32,696,171 
33,189,070 

Total 
Imposts 
$97,202,960 
95,399,399 
108,627,188 
127,381,479 
122,075,994 

'Otto  Wilson:  Forecast  of  Trade  with  South  America  in  1915.  U.  S. 
Bureau  of  Foreign  and  Domestic  Commerce. 

2  Otto  Wilson :  South  America  as  an  Export  Field.  U.  S.  Bureau  of 
Foreign  and  Domestic  Commerce. 

99 


100 


APPENDIX  B 


CHILEAN  COMMERCE  (1913)  • 

Items  Total  Trade 

Imports    (d)    $120,274,001 

Exports   (d)    144,653,312 

Nitrate    111,454,397 

Copper   10,337,360 

Wool    3,383,653 

(d)  Figures  include  gold  and  silver. 


CHILE— STATISTICS  OF  MANUFACTURES 


1911 

Kind  of  Manufactories                     Establishments  Capital 

Alcohol,  beverages,  etc 297  $8,222,433 

Pottery,  ceramics  and  glassware 6  559,009 

Foods  and  food  preparations 807  27,601,757 

Lighting,  heating  and  combustibles    . .  37  6,073,374 

Dock-vard  and  ship  repair  stations....  27  1,065,868 

Clothing,  etc 711  5,869,542 

Wood  and  manufactures    676  8,555,065 

Construction  materials    89  1,921,780 

Textiles    32  3,508,027 

Metals  and  manufactures  805  5,933,705 

Furniture    189  1,155,970 

Paper,  printing  presses,  etc 290  5,277,145 

Hides  and  skins,  and  manufactures  ...  1,199  11,249,800 

Chemical  and  pharmaceutical  products  130  4,046,385 

Tobacco  and  manufactures  98  986,076 

Vehicles   188  1,063,566 

Various    141  1,164,964 

Total  5,722  $94,257,466 

'U.  S.  Commercial  Reports,  January  2,  1915. 


APPENDIX  B 


101 


CHILE 

Statistics  of  Exports1 


Animal 

Vegetable 

Countries 

Year 

Products 

Products 

United  Kingdom . 

1910 

$5,163,334 

$3,950,165 

1911 

4,365,549 

1,537,889 

1912 

4,001,008 

2,739,885 

1913 

5,478,774 

3,069,561 

1914 

5,054,807 

3,118,996 

1910 

1,783,225 

807,318 

1911 

1,610,946 

852,774 

1912 

1,861,578 

1,143,821 

1913 

1,651,860 

944,357 

1914 

1,636,874 

553,293 

United  States. . . . 

1910 

287,755 

124,628 

1911 

96,201 

217,671 

1912 

86,433 

1,601 

1913 

20,097 

185,668 

1914 

158,361 

210,213 

1910 
1911 

1,171,868 
1,157,620 

59,160 

18,744 

1912 

1,385,147 

29,413 

1913 

1,546,571 

26,735 

1914 

670,441 

16,828 

1910 

141,317 

59,259 

1911 

149,224 

158,329 

1912 

57,233 

229,648 

1913 

250,522 

138,017 

1914 

42,583 

45,062 

Netherlands  .... 

1910 

12,814 

46,742 

1911 

50,966 

52,685 

1912 

34,438 

119,369 

1913 

55,652 

14,147 

1914 

32,898 

18,092 

1910 

1,406 

1911 

220 

29,234 

1912 

1913 

1914 

2,190 

1910 

1,993 

209,577 

1911 

613 

431,181 

1912 

716 

228,945 

1913 

33,773 

302,294 

1914 

18 

231,922 

1910 

72,935 

849,401 

1911 

105,451 

1,003,274 

1912 

34,384 

1,020,441 

1913 

25,488 

855,903 

1914 

292,134 

1,132,627 

1910 

1911 

120 

109 

1912 

22 

1913 

1,204 

1914 

1910 

67,447 

859,350 

1911 

41,804 

565,212 

1912 

64,519 

489,103 

1913 

60,540 

445,103 

1914 

13,516 

250,938 

Other  Countries. . 

1910 

120,956 

1,107,517 

1911 

89,955 

414,584 

1912 

55,506 

1,237,806 

1913 

82.621 

1,098,799 

1914 

64,386 

502,645 

1910 

$8,823,644 

$8,074,523 

1911 

7,668,669 

5,381,686 

1912 

7.580,962 

7,240,054 

1913 

9,207,102 

7,080,585 

1914 

7,966,018 

6,082,806 

'For  figures  for   1910-11-12,  see  Otto  Wilson 
U.  S.  Bureau  of  Foreign  and  Domestic  Commerce. 


Mineral  Various 

Products  Products  Total 

$38,714,734  $6,792  $47,835,025 

47,345,056  9,788  53,258,282 

48,360,235  1,521  55,102,649 

46,999,462  544  55,548,341 

31,845,984  21,520  40,041,307 

20,479,097  73,267  23,142,907 

23,698,525  37,525  26,199,770 

25,031,886  23,410  28,060,695 

28,147,807  28,718  30,772,742 

15,879,252  9,567  18,078,986 

24,264,299  4,196  24,680,878 

19,237,176  884  19,551,932 

24,425,951  580  24,514,565 

30,207,534  87  30,413,386 

31,057,978  7,689  31,434,241 

3,947,551  58,707  5,237,286 

4,650,608  38,206  5,865,178 

6,223,415  30,595  7,668,570 

7,251,877  22,702  8,847,885 

3,548,944  8,915  4,245,128 

3,236,880  1,031  3,438,487 

3,166,268  5,208  3,479,029 

4,322,816  1,263  4,610,960 

5,286,020  310  5,674,869 

3,352,460  4,453  3,444,558 

2,391,287         2,450,843 

3,338,118         3,441,769 

4,081,639  102  4,235,548 

4,400,303         4,470,102 

3,239,967  38  3,290,995 

1,987,458  1,398  1,990,262 

1,981,025  1,171  2,011,650 

1,834,419         1,834,419 

987,174         987,174 

1,186  3,376 

14,339  225,909 

787,661  2,621  1,222,076 

2,483,624  4,395  2,717,680 

86,172  1,797  424,036 

2,438  234,378 

10,291  116,147  1,048,774 

13,471  76,466  1,198,662 

17,388  56,348  1,128,561 

94,832  58,658  1,034,880 

7,064  79,684  1,511,508 

730,215  26  730,241 

1,018,296  1,132  1,019,657 

957,114  109  957,245 

1,332,277         1,333,481 

818,961  4,537  823,498 

1,347  357,870  1,286,014 

2,591  56,934  666,541 

2,259  30,421  586,302 

11,200  30,433  547,276 

9,666  15,595  289,715 

2,471,177  16,635  3,716,285 

2,244,462  13,176  2,762,177 

4,923,996  8,151  6,225,459 

1,561,759  4,223  2,747,402 

3,448,132  14,458  4,030,621 

$98,234,336  $650,408  $115,782,911 

107,483,257  243,111  120,676,723 

122,664,742  157,395  137,643,153 

126,366,417  147,172 

93,208,408  170,080 

South  America  as  an  Export  Field. 


37867 

DATE  DUE 

J 

GAYLORD 

PRINTED  INU.S. A. 

- 

UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


A     000  548  303     7 


